BriefExercise18 x
Brief Exercise 18-16
|
Crane Inc. sells tickets for a Caribbean cruise on ShipAway Cruise Lines to Carmel Company employees. The total cruise package price to Carmel Company employees is $67,000. Crane Inc. receives a commission of 7
%
of the total price. Crane Inc. therefore remits $62,310 to ShipAway.
Prepare the journal entry to record the remittance and revenue recognized by Crane Inc. on this transaction.
(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No entry” for the account titles and enter 0 for the amounts.)
Brief Exercise 18-7
Monty Corp. enters into a contract with a customer to build an apartment building for $979,400. The customer hopes to rent apartments at the beginning of the school year and provides a performance bonus of $144,300 to be paid if the building is ready for rental beginning
August 1,
20
18
. The bonus is reduced by $48,100 each week that completion is delayed. Monty commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:
Completed by |
Probability |
|
August 1, 2018 |
70 |
% |
August 8, 2018 |
20 | |
August 1 5 , 2018 |
5 | |
After August 15, 2018 |
(a) Determine the transaction price for the contract, assuming Monty is only able to estimate whether the building can be completed by August 1, 2018, or not (Monty estimates that there is a 70% chance that the building will be completed by August 1, 2018).
(If answer is 0, please enter 0. Do not leave any fields blank.)
(b) Determine the transaction price for the contract, assuming Monty has limited information with which to develop a reliable estimate of completion by the August 1, 2018, deadline.
(If answer is 0, please enter 0. Do not leave any fields blank.)
Brief Exercise 18-12
Flint Company sells goods to Buffalo Company during 2017. It offers Buffalo the following rebates based on total sales to Buffalo. If total sales to Buffalo are 10,100 units, it will grant a rebate of 2%. If it sells up to 19,700 units, it will grant a rebate of 5%. If it sells up to 32,800 units, it will grant a rebate of 5%. In the first quarter of the year, Flint sells 10,400 units to Buffalo at a sales price of $114,400. Flint, based on past experience, has sold over 37,900 units to Buffalo, and these sales normally take place in the third quarter of the year.
What amount of revenue should Flint report for the sale of the 10,400 units in the first quarter of the year?
Determine the transaction price of the arrangement for Concord, assuming 90 policies are sold. Transaction price $ |
Determine the revenue that Concord will recognize in 2017. Revenue $ |
Exercise 18-7 |
Determine the transaction price of the arrangement for Metlock Biotech. Transaction price $ |
Assuming that regulatory approval was granted on December 20, 2017, and that Metlock received the payment from Pang on January 15, 2018, prepare the journal entries for Metlock. The license meets the criteria for point-in-time revenue recognition. |
Exercise 18-14 (Part Level Submission) ● Winkerbean purchases equipment from Carla for a price of $920,000 and contracts with Carla to install the equipment. Carla charges the same price for the equipment irrespective of whether it does the installation or not. Using market data, Carla determines installation service is estimated to have a standalone selling price of $50,500. The cost of the equipment is $643,000. ● Winkerbean is obligated to pay Carla the $920,000 upon the delivery and installation of the equipment. Carla delivers the equipment on June 1, 2017, and completes the installation of the equipment on September 30, 2017. The equipment has a useful life of 10 years. Assume that the equipment and the installation are two distinct performance obligations which should be accounted for separately. |
(a) Equipment $ Installation $ |
(b) |
Problem 18-5 Item Standalone Mini-trencher $ 3,900 ($2,000 ) Power fence hole auger 1,400 (800 ) Grain/hay dryer 13,400 (11,800 ) Respond to the requirements related to the following independent revenue arrangements for Cheyenne Ranch & Ayayai. |
On January 1, 2017, Cheyenne sells 50 augers to Mills Farm & Fleet for $70,000. Mills signs a 6-month note at an annual interest rate of 12%. Cheyenne allows Mills to return any auger that it cannot use within 50 days and receive a full refund. Based on prior experience, Cheyenne estimates that 5% of units sold to customers like Mills will be returned (using the most likely outcome approach). Cheyenne’s costs to recover the products will be immaterial, and the returned augers are expected to be resold at a profit. Prepare the journal entry for Cheyenne on January 1, 2017. |
On August 10, 2017, Cheyenne sells 15 mini-trenchers to a farm co-op in western Minnesota. Cheyenne provides a 4% volume discount on the mini-trenchers if the co-op has a 15% increase in purchases from Cheyenne compared to the prior year. Given the slowdown in the farm economy, sales to the co-op have been flat, and it is highly uncertain that the benchmark will be met. Prepare the journal entry for Cheyenne on August 10, 2017. |
Cheyenne sells three grain/hay dryers to a local farmer at a total contract price of $43,400. In addition to the dryers, Cheyenne provides installation, which has a standalone selling price of $1,000 per unit installed. The contract payment also includes a $1,100 maintenance plan for the dryers for 3 years after installation. Cheyenne signs the contract on June 20, 2017, and receives a 20% down payment from the farmer. The dryers are delivered and installed on October 1, 2017, and full payment is made to Cheyenne. Prepare the journal entries for Cheyenne in 2017 related to this arrangement. |
On April 25, 2017, Cheyenne ships 100 augers to Ayayai Depot, a farm supply dealer in Nebraska, on consignment. By June 30, 2017, Ayayai Depot has sold 50 of the consigned augers at the listed price of $1,400 per unit. Ayayai Depot notifies Cheyenne of the sales, retains a 10% commission, and remits the cash due Cheyenne. Prepare the journal entries for Cheyenne and Ayayai Depot for the consignment arrangement. |
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