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Test bank for intermediate accounting ifrs edition 2e

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Test Bank for Intermediate Accounting, IFRS Edition, 2eSolution 18-127(cont.)September 15, 2015Cash...........................................................................................................500Unearned Service Revenue........................................................................808Service Revenue (Installation).............................................................808Accounts Receivable...........................................................................500Ex. 18-128—Sales with discounts.On July 2, 2015, Lake Company sold to Sue Black merchandise having a sales price of $6,000(cost $3,600) with terms of 2/10, n/30, f.o.b. shipping point. Lake estimates that merchandise witha sales value of $600 will be returned. An invoice totaling $120, terms n/30, was received by Blackon July 6 from Pacific Delivery Service for the freight cost. Upon receipt of the goods, on July 3,Black notified Lake that $250 of merchandise contained flaws. The same day, Lake issued a creditmemo covering the defective merchandise and asked that it be returned at Lake’s expense. Lakeestimates the returned items to have a fair value of $100. The freight on the returned merchandisewas $20 paid by Lake on July 7. On July 12, the company received a check for the balance duefrom Black.Instructions(a)Prepare journal entries for Lake Company to record all the events noted above assuming salesand receivables are entered at gross selling price.(b)Prepare the journal entry assuming that Sue Black did not remit payment until August 5.Solution 18-128(a)July 2Accounts Receivable....................................................................6,000Refund Liability.................................................................600Sales Revenue.................................................................5,400Estimated Inventory Returns........................................................360*Cost of Goods Sold......................................................................3,240Inventory...........................................................................3,600*($3,600÷$6,000) X $600July 3Refund Liability.............................................................................250Accounts Receivable........................................................250Returned Inventory.......................................................................100Estimated Inventory Returns.............................................100Downloaded by Kathleen Oligario ([email protected])18 - 30lOMoARcPSD|9278937
Revenue Recognition18 - 31
Ex. 18-129—Allocate transaction price.The Appliance Store is an experienced home appliance dealer. Appliance Store also offers anumber of services together with the home appliances that it sells. Assume that Appliance Storesells dishwashers on a standalone basis. Appliance Store also sells installation services andmaintenance services for dishwashers. However, Appliance Store does not offer installation ormaintenance services to customers who buy dishwashers from other vendors. Pricing fordishwashers is as follows.Dishwasher only$950Dishwasher with Installation service1,050Dishwasher with maintenance services1,150Dishwasher with installation and maintenance services1,200In each instance in which maintenance services are provided, the maintenance service isseparately priced within the arrangement at $200. Additionally, the incremental amount charged byAppliance Store for installation approximates the amount charged by independent third parties.Dishwashers are sold subject to a general right of return. If a customer purchases a dishwasherswith installation and/or maintenance services, in the event Appliance Store does not complete theservice satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds$800.Instructions(a)Assume that a customer purchases a dishwasher with both installation and maintenanceservices for $1,200. Based on its experience, Appliance Store believes that it is probable thatthe installation of the equipment will be performed satisfactorily to the customer. Assume thatthe maintenance services are priced separately. Identify the separate performance obligationsrelated to the Appliance Store revenue arrangement.Downloaded by Kathleen Oligario ([email protected])

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Revenue, Kathleen Oligario

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