Lesson%205%20Solutions - Suggested Solutions for ACCT 351...

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Suggested Solutions for ACCT 351 Adapted from Beechy, T. H., & Conrod, J. E. D. (2005). Solutions manual to accompany intermediate accounting, volume 1 (3 rd Can. ed.). Toronto: McGraw-Hill Ryerson. Reproduced with permission. Page 1 of 15 Lesson 5, Chapter 6 Assignment 6-1 (text, p. 320) a) Interest revenue is recognized as time passes according to amount earned. b) Interest revenue is recognized as time passes according to amount earned. c) Revenue would be recognized on a cost recovery basis, where payments received would be considered repayment of principal until the entire principal is recovered, with any additional payments received being recognized as interest revenue. d) Revenue recognition would be deferred until the service of transporting the passenger is completed. e) Revenue would be recognized as soon as the transporting of the freight is completed (delivery). f) Revenue can be recognized only when the trees are sold (delivery). g) Revenue will be recognized as the completed houses are sold and delivered to a customer. Completed houses are included in inventory at cost. h) Revenue could and likely would be recognized on a percentage-of-completion basis, without regard to when payment is received or when the completed houses are delivered to the purchaser. i) Either the instalment sales method or the cost recovery method would be used to recognize revenue. In this case the more usual treatment is the instalment sales method. j) Revenue would be recognized as it is earned, which in this case will be with the passage of time. The large initial payment will be accounted for as deferred revenue. k) Because it is not possible to reliably determine the costs for completing this project, the completed-contract method of revenue recognition would be used. l) It would be permissible to use the production method and recognize revenue as the silver is produced, since this is a commodity that is traded daily at known prices. Subsequent increases and decreases in market value would be recognized as gains and losses.
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