ch18 - SOLUTIONS TO B EXERCISES E18-1B (1520 minutes) (a)...

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SOLUTIONS TO B EXERCISES E18-1B (15–20 minutes) (a) Chester Books could recognize revenue at the point of sale based upon the time of shipment because the books are sold f.o.b. shipping point. Because of the return policy, one might argue in favor of the cash collection basis. Because the returns can be estimated, one could argue for shipping point less estimated returns. (b) Based on the available information and lack of any information indicat- ing that any of the criteria in FASB Statement No. 48 were not met, the correct treatment is to report revenue at the time of shipment as the gross amount less the 16% normal return factor. This is supported by the legal test of transfer of title and the criteria in FASB No. 48 . One could be very conservative and use the 20% maximum return al- lowance. (c) October sale entry: Accounts Receivable. ..................................... 6,500,000 Allowance for Returns. ........................... 1,040,000 ($6,500,000 X 16%) Sales Revenue. ........................................ 5,460,000 (d) January collection: Cash. ................................................................ 5,775,000 Allowance for Returns. ................................... 1,040,000 Sales Revenue. ........................................ 315,000 Accounts Receivable. ............................. 6,500,000 18-1
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E18-2B (15–20 minutes) (a) (1) 10/5 ....... 23,000 Sales. ........................................................ 23,000 10/9 Sales Returns and Allowances. .................. 2,400 .. 2,400 10/25 Transportation-Out. ...................................... 36 Cash. ....................................................... 36 11/2 Cash. .............................................................. 20,600 .. 20,600 (2) 10/5 ..... 22,770 Sales [$23,000 – (1% X 23,000)]. .......... 22,770 10/9 Sales Returns and Allowances. .................. 2,376 .. 2,376 [$2,400 – (1% X $2,400)] 10/25 Transportation-Out. ...................................... 36 Cash. ....................................................... 36 11/2 Cash. .............................................................. 20,600 ..... 20,394 Sales Discounts Forfeited. ........................... 206 (1% X $20,600) (b) 10/14 Cash. .............................................................. 20,394 .. 20,394 18-2
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E18-3B (10–15 minutes) Cash (2008 memberships). .................................. 5,760,000 [400 X $16,000 X (1.00 – 0.10)] Unearned Revenue (current). ....................... 5,760,000 Cash (2008 memberships). .................................. 1,920,000 [150 X $16,000 X (1.00 – .20)] Unearned Revenue (noncurrent). ................ 1,920,000 Cash (2009 memberships). .................................. 1,920,000 [150 X $16,000 X (1.00 – .20)] Unearned Revenue (noncurrent). ................ 1,920,000 18-3
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This note was uploaded on 05/10/2010 for the course ACC 440 BSB1658 taught by Professor Warwick during the Spring '09 term at University of Phoenix.

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ch18 - SOLUTIONS TO B EXERCISES E18-1B (1520 minutes) (a)...

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