Solutions Ch-5Exercises

Solutions Ch-5Exercises - Exercise 5-1 Requirement 1 Alpine...

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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, 2011 To record the cash collection Cash............................................................................ 450 .......................................................Unearned revenue ..............................................................................450 December 31, 2011 To recognize revenue earned in December (no revenue earned in November, as season starts on December 1). Unearned revenue ($450 x 1 / 5 ) .................................... 90 ......................................................................Revenue ................................................................................90 Requirement 3 $90 is included in revenue in the 2011 income statement. The $360 remaining balance in unearned revenue is included in the current liability section of the 2011 balance sheet. Exercise 5-2 Requirement 1 2011 Cost recovery %: $234,000 = 65% (gross profit % = 35%) $360,000 2012 Cost recovery %: $245,000 = 70% (gross profit % = 30%) $350,000 2011 gross profit: Cash collection from 2011 sales of $150,000 x 35% = $52,500 2012 gross profit: Cash collection from 2011 sales of $100,000 x 35% = $ 35,000 + Cash collection from 2012 sales of $120,000 x 30% = 36,000 Total 2012 gross profit $71,000 Requirement 2 2011 deferred gross profit balance: 2011 initial gross profit ($360,000 – 234,000) $126,000 Less: Gross profit recognized in 2011 (52,500 ) Balance in deferred gross profit account $73,500 2012 deferred gross profit balance: 2011 initial gross profit ($360,000 – 234,000) $ 126,000 Less: Gross profit recognized in 2011 (52,500) Gross profit recognized in 2012 (35,000) 2012 initial gross profit ($350,000 – 245,000) 105,000 Less: Gross profit recognized in 2012 (36,000 ) Balance in deferred gross profit account $107,500 Exercise 5-3 2011 To record installment sales Installment receivables............................................... 360,000 ....................................................................Inventory .......................................................................234,000 ..................................................Deferred gross profit .......................................................................126,000 2011 To record cash collections from installment sales Cash............................................................................ 150,000 ...............................................Installment receivables .......................................................................150,000 2011 To recognize gross profit from installment sales Deferred gross profit..................................................Deferred gross profit....
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Solutions Ch-5Exercises - Exercise 5-1 Requirement 1 Alpine...

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