Professional Documents
Culture Documents
1. Optimus Pools, Inc. constructs outdoor swimming pools for wealthy individuals. Recently
it obtained an order to build a three-lane swimming pool of 25 yards in length in the
customer’s backyard. Under the contract, Optimus is also obligated to install a water
heater and a filtration system, which are necessary to make a swimming pool fully
functional. Total price for the construction was $55,000. Each of these smaller
components would typically cost $40,000, $10,000, and 20,000 if installed separately.
How many performance obligations are included in this contract?
Answer: 1
2. Accorsi & Sons specializes in selling and installing upscale home theater systems. On
March 1, 2016, Accorsi sold a premium home theater package that includes a projector,
set of surround speakers, and high quality leather seats, along with complete installation
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service, for $32,500. If sold separately, each of these goods and services would have cost
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$15,000 (projector), $12,500 (speakers), $17,500 (seats), and $3,000 (installation),
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respectively. How much of the transaction price would be allocated to the projector, the
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speakers, the leather seats, and the installation service, assuming that each of these four
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parts of the contract is a separate performance obligation?
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Answer: Projector = $10,156.25; Speakers= $8,463.00; Seats=$11,849.50; Installation
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service=$2,031.25
3. Baldi Piano manufactures customized pianos for concert halls. On July 1, 2016, Baldi
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signed a contract to deliver a concert piano for $150,000. Under the contract, Baldi is
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also obligated to provide a one-year maintenance service. If sold separately, the piano
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and the maintenance service would have cost $140,000 and $20,000, respectively.
Assume that these are viewed as two performance obligations, how much revenue
would Baldi recognize in July (assuming the piano is delivered on July 1, 2016)?
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Answer: $132,812.50
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Chapter 7
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1. A summary of London Fashion's December 31, 2013, accounts receivable aging schedule
is presented below along with the estimated percent uncollectible for each age group:
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The allowance for uncollectible accounts had a balance of $1,600 at January 1, 2013.
During the year bad debts of $1,150 were written off.
Required: Prepare all 2013 journal entries with respect to bad debts and the allowance
for uncollectible accounts.
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2. During Burns Company's first year of operations, credit sales totaled $140,000 and
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collections on credit sales totaled $105,000. Burns estimates that bad debt losses will be
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1.5% of credit sales. By year-end, Burns had written off $300 of specific accounts as
uncollectible.
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Required:
1. Prepare all appropriate journal entries relative to accounts receivable, uncollectible
accounts and bad debt expense.
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Part 1:
A/R 140,000
Sales 140,000
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Cash 105,000
A/R 105,000
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Part 2:
A/R $34,700
Less: Allowance of Uncollectible Accounts 1,800
A/R, net $32,900
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3. E7-13
Answer: $17,639.30
4. On June 30, 2013, Blondie Fixtures was considering alternatives to bolster its cash
position. Option One called for transferring $400,000 in accounts receivable to Dogwood
Finance Company without recourse for a 5% fee. Option Two calls for Blondie to transfer
the $400,000 in receivables to Dogwood with recourse. Dogwood's charges a 4% fee for
receivables factored with recourse. Option Two meets the conditions to be considered a
sale, but Blondie estimates a $3,000 recourse liability. Under either option, Dogwood
will immediately remit 90% of the factored receivables to Blondie, and retain 10%. When
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Dogwood collects the remaining receivables, it remits the amount, less the fee, to
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Blondie. Blondie estimates that the fair value of the final 10% of the receivables is
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$25,000 (ignoring the factoring fee).
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Required:
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1. Prepare any necessary journal entry or entries if receivables are factored under
Option One.
Answer:
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Cash 360,000
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2. Prepare any necessary journal entry or entries if receivables are factored under
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Option Two.
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Answer:
Cash 360,000
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Chapter 8
1. Shown below is the activity for one of the products of Random Creations:
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January 1 balance, 80 units @ $50 $4,000
Purchases:
Sales:
a) Compute the January 31 ending inventory and cost of goods sold for January,
assuming Random Creations uses FIFO periodic.
Answer: EI = $2,845 COGS=$5,275
b) Compute the January 31 ending inventory and cost of goods sold for January,
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assuming Random Creations uses LIFO and perpetual inventory system.
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Answer: EI = $2,755 COGS=$5,365
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c) Compute the January 31 ending inventory and cost of goods sold for January,
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assuming Random Creations uses LIFO and a periodic inventory system.
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Answer: EI = $2,750 COGS=$5,370
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d) Compute the January 31 ending inventory and cost of goods sold for January,
assuming Random Creations uses average cost and a periodic inventory system.
Answer: EI = $2,791.25 COGS=$5,328.75
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e) Compute the January 31 ending inventory and cost of goods sold for January,
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assuming Random Creations uses average cost and a perpetual inventory system.
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2. On January 1, 2013, the National Furniture Company adopted the dollar-value LIFO
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Chapter 9:
1)
Weldon Animal Feeds has developed the following data for lower of cost and net
realizable valuation for its products (in thousands):
Selling
Price Cost
Large animals:
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Horse 400 400
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Small animals:
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Cat $360 $320
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Dog 120 90
Exotic pets:
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Iguana 70 48
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Required:
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Determine the reported inventory value assuming the lower of cost and net realizable
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Answer: $1,018
b) classes of feeds.
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Answer: $1,104
c) total inventory.
Answer: $1,128
2) On March 17, 2013, a flood destroyed the entire inventory of Beatty Co. The following
information is available from its accounting records:
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Answer: $268,000
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3) Manila Bread Company uses the conventional retail method to estimate its ending
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inventories. The following data has been summarized for the year 2013:
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Answer: $85,029.75
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