2008 Acct 304 Ch 5 Homework Key

2008 Acct 304 Ch 5 Homework Key - Exercise 5-1 Requirement...

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Unformatted text preview: Exercise 5-1 Requirement 1 Alpine West should recognize revenue over the ski season on an anticipated usage basis, in this case equally throughout the season. The fact that the $450 price is nonrefundable is not relevant to the revenue recognition decision. Revenue should be recognized as it is earned, in this case as the services are provided during the ski season. Requirement 2 November 6, 2009 To record the cash collection Cash............................................................................ 450 .......................................................Unearned revenue ..............................................................................450 December 31, 2009 To recognize revenue earned in December (no revenue earned in November, as season starts on December 1). Un earned revenue ($450 x 1 / 5 ) ......................................... 90 ......................................................................Revenue ................................................................................90 Requirement 3 $90 is included in revenue in the 2009 income statement. The $360 remaining balance in unearned revenue is included in the current liability section of the 2009 balance sheet. Exercise 5-2 Requirement 1 2009 Cost recovery %: $234,000 = 65% (gross profit % = 35%) $360,000 2010 Cost recovery %: $245,000 = 70% (gross profit % = 30%) $350,000 2009 gross profit: Cash collection from 2009 sales of $150,000 x 35% = $52,500 2010 gross profit: Cash collection from 2009 sales of $100,000 x 35% = $ 35,000 + Cash collection from 2010 sales of $120,000 x 30% = 36,000 Total 2010 gross profit $71,000 Requirement 2 2009 deferred gross profit balance: 2009 initial gross profit ($360,000 - 234,000) $126,000 Less: Gross profit recognized in 2009 (52,500 ) Balance in deferred gross profit account $73,500 2010 deferred gross profit balance: 2009 initial gross profit ($360,000 - 234,000) $ 126,000 Less: Gross profit recognized in 2009 (52,500) Gross profit recognized in 2010 (35,000) 2010 initial gross profit ($350,000 - 245,000) 105,000 Less: Gross profit recognized in 2010 (36,000 ) Balance in deferred gross profit account $107,500 Exercise 5-7 October 1, 2009.....................................
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2008 Acct 304 Ch 5 Homework Key - Exercise 5-1 Requirement...

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