Week 1 Homework for Acctg 557

Week 1 Homework Acctg 557 Problem 1: PAT'S ELECTRONIC DIVISION: (a) Point of Sale: Completion-of-production: Percentage-of-completion Installment-Sales (b) PAT'S ELECTRONIC DIVISION Billed and Shipped Down Payments Freight Billed Commissions ($2,400,000 x 10%) Warranty Returns ($3,000,000 x 1%) Revenue for 2012 PICKLE CONSTRUCTION: Percent complete as of 12/31/12 (5/24) 5 months of 24 months complete Total expected revenue ($60,000,000-$52,000,000) Cost to date Revenue ($8,000,000 x 21%) GAAP? Yes Yes Yes No

Definition: This is when companies recognize revenue received at the This is when companies recognize revenue when the agrai Revenue is recognized as well as gross profits by a specifie Recognizes revenue in the collection period rather than th

$ 2,400,000.00 $ 300,000.00 $ 70,000.00 $ (240,000.00) $ (3,000.00) $ 2,527,000.00

21% $ 8,000,000.00 $ 14,140,000.00 $ 1,660,000.00

PEACE BOOK DISTRIBUTION DIVISION 2011 Sales Collected 2011 Sales Returned (2.5 mil x 19%) Total Sales for 2012 Sales still available for return Actual returns on sales ($9,000,000 x 21%) Gross revenue for 2012 Problem 2: Curiosity Company (a) Installment A/R Installment Sales Cash Installment A/R

$ $ $ $ $ $

2,500,000.00 (475,000.00) 9,000,000.00 (2,000,000.00) (1,890,000.00) 7,135,000.00

$

800,000.00 $ 800,000.00

$

320,000.00 $ 320,000.00

Cost of Goods Sold Inventory Unpaid Merchandise for open balances Installment A/R (b) Installment sales for current year Cost of Goods Sold Gross Profit

$

600,000.00 $ 600,000.00

$

52,000.00 $ 52,000.00

$

800,000.00 $ $ 600,000.00 200,000.00

gnize revenue received at the point of sale, meaning at delivery. Common for manufacturing and retail establishments. gnize revenue when the agraicultaral products are harvested or dealing with minerals because the sales price is assured and units are inte ll as gross profits by a specified period of time based on the progress of the percentage of completion