MGT131BHW5 - 200000 Allowance for sales return 1800000 cash...

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E 18-1 a) They could recognize revenue at the point of sale based on the time of  shipment because the books are sold f.o.b. shipping point. Due to the  return policy it could be in favor of the cash collection basis. As the  returns can be estimated, shipping point less estimated returns is also  an alternative. b) As they have estimated the normal return rate to 12%, it is correct to  recognize the revenue at point of sale and subtract the 12%. However, if one wants to be concervative 30% can be subtracted as this is the max return they can receive c) AR 15000000 Sales Revenu 15000000 Sales return 1800000 Allowance for sales return 1800000 d) Sales revenue
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Unformatted text preview: 200000 Allowance for sales return 1800000 cash 13000000 AR 15000000 E18-7 2010 2011 a) 1) cost incurred to date 280000 600000 total cost 800000 800000 % of completion 35.00% 75.00% Total profit 400000 400000 recognized profit 140000 160000 a) 2) construction in process 320000 Materials, wages payable 320000 AR 350000 Billing on construction in process 350000 Cash 200000 AR 200000 Construction in process 160000 Construction expense 320000 Rvenues from building contract 480000 b) Incomestatement gross profit on building contract 160000 Balance sheet Current assets Receivables for construction in process 160000 Inventories for construction in process 400000...
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This note was uploaded on 10/21/2010 for the course ECON 1530 taught by Professor Ohly during the Spring '10 term at Dartmouth.

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MGT131BHW5 - 200000 Allowance for sales return 1800000 cash...

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