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End of Module 5 questions

End of Module 5 questions - Q5-3 For an event to be...

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Unformatted text preview: Q5-3 For an event to be accurately categorized as an extraordinary item it has to meet a certain criteria. It has to be of unusual nature and of infrequent occurrence, meaning that it possesses a high degree of abnormality and its reoccurrence is not expected in the foreseeable future (Easton, Halsey, McAnally, Hartgraves, & Morse, 2010). One example of an extraordinary item would be damages and losses suffered by several industrial buildings in Cataño, Puerto Rico when an oil refinery exploded back in 2009. Losses caused by a labor strike on the other hand should not be considered an example of extraordinary items. Q5-10 It is common practice in many industries to receive advanced cash payments before the action that actually earns them the revenue takes place. In those cases companies must record such payment as a liability, unearned revenue. Revenue can only be recorded after the earning process is complete. (Easton, Halsey, McAnally, Hartgraves, & Morse, 2010). A travel agency collecting a deposit from a client for a Cruise Ship that departs at a future date, a professional boxer receiving an advanced payment from his purse to cover expenses during training camp before the fight and cash received at the Lay Away department of a store are three examples of unearned revenue. References: Easton, P. D., Halsey, R. F., McAnally, M. L., Hartgraves, A. & Morse, W. J., (2010). Financial & Managerial Accounting for MBAs. Canada: Cambridge Business Publishers, LLC. ...
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