Cr interest revenue 240 24038 x 08 1512 24038 dr

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Cr. Interest revenue 240 24,038 x .08 * 1.5/12 = 240.38 Dr. Interest Receivable 117 Cr. Interest revenue 117 20,000 * .07 * 1/12 = 116.67 Dr. Bad Debt expense 13,500 Cr. Allowance for doubtful accounts 13,500 C) Balances A/R Allowance for D.A 107,500 2,400 6,500 6,500 15,000 13,500 15,000 9,400 25,000 76,000
Balance Sheet: Current Assets Accounts Receivable net (76,000 9,400) 66,600 Note receivable (24,038 + 240) 24,278 Note receivable, related party 20,000 Interest receivable 117 D) Income Statement Sales (15,000 + 24,038) 39,038 Less discounts taken 300 Net Sales 38,738 Interest revenue (240 + 117) 357 Bad debt expense 13,500 Loss on factoring A/R 500
Question 6 Part A Junior Girl Magazine bills customers for annual subscriptions at the beginning of the subscription year for its bi-weekly magazine. Following is the partial information from the subscription received in advance account for the year 2003: Subscription Received in Advance Balance January 1, 2003 $82,000 Cr Total debits to this account for 2003 $115,000 Dr Total credits to this account for 2003 $131,200 Cr Required: a. What is the subscription revenue for the year 2003? b. What is the amount of subscription revenue for the year 2003 that is related to subscriptions received in the year 2002? c. What is the amount of subscription revenue for 2003 that is related to subscriptions received in 2003? d. What is the amount of subscription revenue for the year 2004 that is related to subscriptions received in 2003? Solution:
Part B We-R-Nuts Inc. (WRNI) markets and sells a popular vari ety of nuts. One of WRNI’s contracts makes it the exclusive peanut supplier for a major airline. WRNI signed the three-year non-cancellable contract, which began in January 2005. The contract stipulates the following binding obligations: WRNI sells its p eanuts to the airline at discounted prices of $0.05 per “mini peanut” bag. WRNI agrees to purchase a minimum of $100,000 of airline tickets from the airline to be used for travel by WRNI’s personnel. If WRNI does not purchase the minimum amount of travel as stipulated in the contract by the end of any year of the contract, it must make an additional payment for the shortfall. The prices WRNI pays for plane tickets are comparable to those available to the general public. It is now early 2006, and the 2005 financial statements are being finalized for both companies, as they both have a December 31 year-end. Information on 2005 activity: The airline has ordered and received delivery of 3,120,000 “mini peanut” bags. WRNI has booked & travelled for $85,000 worth of airfare costs. Required: Discuss the appropriate financial accounting and reporting treatment of the above contract arrangement for 2005. You must indicate the amounts and accounts affected by this arrangement. Do this from: (a) the perspective of the vendor (WRNI) and (b) the perspective of their customer (i.e. the major airline). Suggested Solution: ========
Travel costs = fair value of travel = $85,000 With respect to the air travel, WRNI is receiving an identifiable benefit from the airline. That benefit is sufficiently separable from the airline’s purchase of WRNI’s peanuts because WRNI could have used any other airline for its corporate travel.

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