ACTG 1P91 Chapter Notes - Chapter 3: Gift Card, Revenue Recognition, Income Statement
ACTG 1P91 Full Course Notes
Document Summary
Get access
Related Documents
Related Questions
| Anderson Accounting Services LLC provides accounting and tax preparation and consulting services. Sometimes customers only wish to have financial statements and/or tax returns prepared. Sometimes customers bundle accounting and tax preparation with consulting services (to be provided over a period of time). Sometimes customers only wish to have consulting services provided over a period of time. Because Anderson is a service firm there is no cost of goods sold associated with their services. | ||||||||
| Customer is Civic Corporation | 1 | |||||
| Tax consulting begins on November 1st and runs through the next April | 11/1/X7 | |||||
| Date of contract | 11/1/X7 | |||||
| Length of consulting services | 6 months | months | ||||
| Tax return preparation occurs over the period February through April of | 20X8 | |||||
| Length of tax prepartion | 3 months | |||||
| Price of tax preparation to be allocated over the return preparation period | $ 2,000 | stand alone price | ||||
| Price of consulting services to be allocated over consulting period | $ 5,000 | stand alone price | ||||
| Customers are charged a lesser amount as follows for both tax and consulting | $ 6,000 | |||||
| Anderson Accounting Services LLC's current year end | 12/31/X7 | |||||
| Customers pay at the contract date for BOTH the consulting and tax preparation services. | ||||||
What are the performance obligations in the contract?
| A. | Tax preparation services | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| B. | Tax preparation services and tax consulting services | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| C. | Unable to determine | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| D.Tax consulting services QUESTION 3 Determine the transaction price that should be allocated to the consulting services.
QUESTION 4 Calculate the total revenue that should be recognized in the current accounting period.
QUESTION 5 What is the total amount in the deferred revenue account(s) at the end of the current accounting period?
QUESTION 6 What is the total amount of revenue that should be recognized in the NEXT accounting period period?
QUESTION 7 The following journal entry has what impact on the income statement? Debit Cash XXX Credit Deferred Revenue XXX
QUESTION 8 The following journal entry has what impact on the income statement? Debit Cash XXX Credit Accounts Receivable XXX
QUESTION 9
QUESTION 10
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The income statement and a schedule reconciling cash flows fromoperating activities to net income are provided below for MacrosoftCorporation. |
| MACROSOFTCORPORATION Income Statement For the Year Ended December 31, 2016 ($ in millions) |
| Revenues andgains: | ||||||
| Sales | $ | 292.00 | ||||
| Gainon sale of cash equivalents | 1.10 | |||||
| Gain onsale of investments | 23.10 | $ | 316.20 | |||
| Expenses and loss: | ||||||
| Cost ofgoods sold | $ | 111.00 | ||||
| Salaries | 39.10 | |||||
| Interestexpense | 11.10 | |||||
| Insurance | 19.10 | |||||
| Depreciation | 9.10 | |||||
| Patentamortization | 3.10 | |||||
| Losson sale of land | 5.10 | 197.60 | ||||
| Income before tax | 118.60 | |||||
| Income taxexpense | 59.30 | |||||
| Netincome | $ | 59.30 | ||||
| Reconciliation of Net Income to Net Cash Flows from Operating Activities ($ in millions) | |||
| Netincome | $ | 59.30 | |
| Adjustments fornoncash effects: | |||
| Depreciationexpense | 9.10 | ||
| Patent amortizationexpense | 3.10 | ||
| Loss on sale ofland | 5.10 | ||
| Gain on sale ofinvestment | (23.10 | ) | |
| Decrease in accountsreceivable | 5.10 | ||
| Increase ininventory | (11.10 | ) | |
| Increase in accountspayable | 17.10 | ||
| Decrease in bonddiscount | .10 | ||
| Increase in salariespayable | 5.10 | ||
| Decrease in prepaidinsurance | 3.10 | ||
| Increase in income taxpayable | 9.10 | ||
| Net cash flowsfrom operating activities | $ | 82.00 | |
|
Cash received from customers Cash increase from sale of cash equivalents Cash paid to suppliers Cash paid to employees Cash paid for interest Cash paid for insurance Cash paid for income taxes Net cash flows from operating activities | |||
24. Jones Co. invests $10,000 @ 10% per year, compounded annually for six years. 4 points The PV of 1 is .7903 and the amount or future value of 1 is 1.7716. $_________
25. Jones Co. wants $25,000 in 6 years. The PV of 1 is .7903 and the amount of 1 is 1.7716. 4 points How much should he invest in Year 1? ____________
26. Assume you invest 1,000 each year for 5 years? How much will be in the fund on 12/31 Year 5? The FV of an annuity is 5.5256 and the PV of an annuity is 5.8019. 3 pts
$_________
28. The following is a comparative balance sheet for Top Ten Clothiers Inc. for the years 2016 and 2015: 14 points
| Top Ten Clothiers Inc. Comparative Balance Sheet December 31, 2016 and 2015 | ||
| Assets | 2016 | 2015 |
| Cash .................................. | $ 43,000 | $ 240,000 |
| Accounts receivable ................... | 390,000 | 210,000 |
| Inventory ............................. | 360,000 | 450,000 |
| Long-term investments ................. | 0 | 120,000 |
| Total assets ........................ | $ 793,000 | $1,020,000 |
| Liabilities and Equities | ||
| Accounts payable ...................... | $ 150,000 | $ 240,000 |
| Operating expenses payable ............ | 48,000 | 30,000 |
| Bonds payable ......................... | 140,000 | 200,000 |
| Common stock .......................... | 250,000 | 250,000 |
| Retained earnings ..................... | 205,000 | 300,000 |
| Total liabilities and equities ...... | $ 793,000 | $1,020,000 |
The income statement for the year ended December 31, 2016, follows:
| Top Ten Clothiers Income Statement For the Year Ended December 31, 2016 | ||
| Sales | $1,120,000 | |
| Cost of goods sold: | ||
| Beginning inventory, January 1, 2016 | $ 450,000 | |
| Purchases ........................... | 660,000 | |
| Cost of goods available ............. | $1,110,000 | |
| Less ending inventory, December 31, 2016 ............................... | 360,000 | 750,000 |
| Gross profit on sales ................. | $ 370,000 | |
| Operating expenses ... | 360,000 | |
| Operating income ...................... | $ 10,000 | |
| Other revenues and expenses: | ||
| Loss on sale of long-term investment | (15,000) | |
| Net loss .............................. | $ (5,000) | |
After paying cash dividends, the decrease in retained earnings totaled $95,000. Management is alarmed by the shrinkage in the company's cash position during 2016. Prepare a partial statement of cash flows for 2016 using the direct method.
| Top Ten Clothiers Inc. Statement of Cash Flows For the Year Ended December 31, 2016 | ||
| Cash flows from operating activities: | ||
| Cash receipts from customers ......? | $ ,000 | |
| Cash payments for: | ||
| Finished Goods Inventory ...... ? | ||
| Operating expenses except 18,000 were in cash.. | ,000 | ,000 |
| Net cash used in operating activities . | $ | |
| Sales .......................................... | $ ,000 |
| Accounts Receivable, beginning ................. | |
| Accounts Receivable, ending .................... | |
| Cash collected from customers ................ | $ |
| Purchases ...................................... | $ ,000 |
| Accounts Payable, beginning .................... | |
| Accounts Payable, ending ....................... | |
| Cash payments for inventory .................... | $ ,000 |
