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Unformatted text preview: receivable (-A) x,xxx
Chapter Three Slide 30 of 74 The Revenue Principle Introduction To Financial Accounting HKUST Assets reflecting revenues earned but not yet received i cash i l d . . . t t i d in h include
CASH TO BE COLLECTED (Owed by ) customers) Interest receivable Rent receivable Royalties receivable REVENUE (Earned when goods or services ) provided) Interest revenue Rent revenue Royalty revenue and already earned as Chapter Three Slide 31 of 74 E3-3 Revenue Recognition Introduction To Financial Accounting HKUST The following transactions occurred in Sept, 2012. For each transaction, indicate the revenue account title and amount. If revenues is not to be recognized in Sept, explain why.
a. a A customer orders and receives 10 personal computers from Dell; the customer promises to pay $18,400 within three months. Answer from Dell's standpoint. Hyundai, Inc, sells a truck with a list price of $20,050 for $18,050 cash. Bon-ton Department Store order 1,000 men's shirt from Arrow Shirt Company for $15 each for future delivery. The terms require payment in full within 30 days of delivery. Answer from Arrow's standpoint. Arrow Shirt Company completes production of the shirts described in (c) and delivers the order. Answer f from Arrow's standpoint. Arrow receives payment from Bon-Ton for the order described in (c). Answer from Arrow's standpoint. A customer purchases a ticket from American Airlines for $410 cash to travel the following January. Answer from American Airlines' standpoint. General Motors issues $20 million in new common stock.
Slide 32 of 74 b. c. d. e. f. g. Chapter Three E3-3 Revenue Recognition Introduction To Financial Accounting HKUST h. Penn State University receives $18,300,000 cash for 80,000 fivegame season football tickets. i. Penn State plays the first football game referred to in (h). j. Precision C Construction C Company signs a contract with a customer for the construction of a new $500,000 warehouse. At the signing, Precision receives a check for $50,000 as a deposit on the future construction. Answer from Precision's standpoint. k. On September 1, 2012, a bank lends $1,200 to a company; the note principal and $144 ($1,200 x 12%) annual interest are due in one year. Answer from the bank's standpoint. l. A popular ski magazine company receives a t t l of $1 980 t d l l ki i i total f $1,980 today from subscribers. The subscriptions begin in the next fiscal year. Answer from the magazine company's standpoint. m. Sears, a retail store, sells a $100 lamp to a customer who charges the sales on his credit card. Answer from Sears' standpoint.
Chapter Three Slide 33 of 74 The Matching Principle Introduction To Financial Accounting HKUST Resources consumed to earn revenues in an accounting period should be recorded in that period, regardless of when cash is paid. paid. Chapter Three Slide 34 of 74 When to Recognize Expenses? General principle Introduction To Financial Accounting HKUST Product costs (costs directly related to the product/service)
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