Kieso+13th+ed+sol+ch+18

Kieso+13th+ed+sol+ch+18 - EXERCISE 18-1 (1520 minutes) (a)...

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EXERCISE 18-1 (15–20 minutes) (a) Uddin 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 indicating that any of the criteria in GAAP were not met, the correct treatment is to report revenue at the time of shipment as the gross amount less the 12% normal return factor. This is supported by the legal test of transfer of title and the criteria in GAAP. One could be very conservative and use the 30% maximum return allowance. (c) Accounts Receivable. ...................................... 15,000,000 Sales Revenue—Texts. ............................ 15,000,000 Sales Returns* ($15,000,000 X 12%). ............. 1,800,000 Allowance for Sales Returns. .................. 1,800,000 (d) Sales Returns*. ................................................. 200,000 Allowance for Sales Returns. ......................... 1,800,000 Accounts Receivable. .............................. 2,000,000 Cash. .................................................................. 13,000,000 Accounts Receivable. .............................. 13,000,000 *A debit to Sales Revenue—Texts or Sales Returns could be made here.
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EXERCISE 18-2 (15–20 minutes) (a) 1. 6/3 Accounts Receivable—Ann Mount. ... 8,000 Sales. ............................................ 8,000 EXERCISE 18-2 (Continued) 6/5 Sales Returns and Allowances. .................. 600 Accounts Receivable—Ann Mount. .... 600 6/7 Transportation-Out. ...................................... 24 Cash. ....................................................... 24 6/12 Cash. .............................................................. 7,252 Sales Discounts (2% X $7,400). ................... 148 Accounts Receivable—Ann Mount. .... 7,400 2. 6/3 Accounts Receivable—Ann Mount. ............ 7,840 Sales [$8,000 – (2% X $8,000)]. ............ 7,840 6/5 Sales Returns and Allowances. .................. 588 Accounts Receivable—Ann Mount [$600 – (2% x $600)]. ........................ 588 6/7 Transportation-Out. ...................................... 24 Cash. ....................................................... 24 6/12 Cash. .............................................................. 7,252 Accounts Receivable—Ann Mount. .... 7,252 (b) 8/5 Cash. .............................................................. 7,400
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Accounts Receivable—Ann Mount. .... 7,252 Sales Discounts Forfeited (2% X $7,400). ..................................... 148 EXERCISE 18-4 (20–25 minutes) (a) Gross profit recognized in: 2010 2011 2012 Contract price $1,600,000 $1,600,000 $1,600,000 Costs: Costs to date $400,000 $825,000 $1,070,000 Estimated costs to complete 600,000 1,000,000 275,000 1,100,000 0 1,070,000 Total estimated profit 600,000 500,000 530,000 Percentage
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Kieso+13th+ed+sol+ch+18 - EXERCISE 18-1 (1520 minutes) (a)...

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