Question & Answer: yuired ach of the transactions, if revenue is to be recognized in September, indicate the revenue account and amount…..

yuired ach of the transactions, if revenue is to be recognized in September, indicate the revenue account and amount. If revenue is not to be recognized in September, explain why For lentifying Expenses E3-4 LO3-2, 3-3 are normally recognized when a company transfers promised goods or services to customers he amount the company expects to receive. Expense recognition is guided by an attempt to match the is t associated with the generation of those revenues to the same time period. The following transac- ions occurred in January MeGraw-Hill Education uses $3,800 worth of electricity and natural gas in its headquarters building for which it has not yet been billed. At the beginning of January. Turner Construction Company pays S963 for magazine advertising to run in monthly publications each of the first three months of the year Dell pays its computer service technicians $403,000 in salaries for the two weeks ended January 1. Answer from Dells standpoint. 4. The University of Florida orders 60,000 season football tickets from its printer and pays $8,340 in advance for the custom printing. The first game will be played in September. Answer from the univer- sitys standpoint. The campus bookstore receives 500 accounting texts at a cost of $160 each. The terms indicate that puyment is due within 30 days of delivery / During the last week of January, the campus bookstore sold 500 accounting texts received in (e) at a sales price of $230 each. Fucillo Automotive Group pays its salespersons $13,800 in commissions related to December auto- mobile sales. Answer from Fucillos standpoint. On January 31, Fucillo Automotive Group determines that it will pay its salespersons S15.560 in com- missions related to January sales. The payment will be made in early February. Answer from Fucillos standpoint. L A new grillis purchased and installed at a Wendys restaurant at the end of the day on January 31: a S12.750 cash payment is made on that day . Destiny USA (formerly Carousel Mall in Syracuse, NY) had janitorial supplies costing $3,500 in stonage. An aditional $2,600 worth of supplies was purchased during January. At the end of January, $1,400 worth of janitorial supplies remained in storage. E An lowa State University employee works eight hours, at si5 per hour, on January 31: however payday is not until February 3. Answer from the universitys point of view. tWang Company paid $4,800 for a fire insurance policy on January 1. The policy covers 12 months beginning on January 1. Answer from Wangs point of view. corporated has its delivery van repaired in January for $600 and charges the amount on account Company, a farm equipment company, receives its phone bill at the end of January for $154 for January calls. The bill has not been paid to date. n Hass artin Company receives and pays in January a $2.034 invoice (bill from a consulting firm for ser- ICCS received in January. Answer from Martins standpoint. services received and recorded p. Parillos Taxi 9 PVH Corp., manufacturer of 1ZOD, ARROW, Van Heusen, Calvin Klein, and Tommy Hilfiger Required in December. appurel, completes production of 450 mens shirts ordered by Macys department stores at a cost of i each and delivers the order. Answer from PVH Corp.s standpoint. of the transactions, if an expense is to be recognized in January, indicate the expense e amount. If an expense is not to be recognized in January, indicate why ing Financial Statement Effects of Various Transactions account and the Determining E3-5

yuired ach of the transactions, if revenue is to be recognized in September, indicate the revenue account and amount. If revenue is not to be recognized in September, explain why For lentifying Expenses E3-4 LO3-2, 3-3 are normally recognized when a company transfers promised goods or services to customers he amount the company expects to receive. Expense recognition is guided by an attempt to match the is t associated with the generation of those revenues to the same time period. The following transac- ions occurred in January MeGraw-Hill Education uses $3,800 worth of electricity and natural gas in its headquarters building for which it has not yet been billed. At the beginning of January. Turner Construction Company pays S963 for magazine advertising to run in monthly publications each of the first three months of the year Dell pays its computer service technicians $403,000 in salaries for the two weeks ended January 1. Answer from Dell’s standpoint. 4. The University of Florida orders 60,000 season football tickets from its printer and pays $8,340 in advance for the custom printing. The first game will be played in September. Answer from the univer- sity’s standpoint. The campus bookstore receives 500 accounting texts at a cost of $160 each. The terms indicate that puyment is due within 30 days of delivery / During the last week of January, the campus bookstore sold 500 accounting texts received in (e) at a sales price of $230 each. Fucillo Automotive Group pays its salespersons $13,800 in commissions related to December auto- mobile sales. Answer from Fucillo’s standpoint. On January 31, Fucillo Automotive Group determines that it will pay its salespersons S15.560 in com- missions related to January sales. The payment will be made in early February. Answer from Fucillo’s standpoint. L A new grillis purchased and installed at a Wendy’s restaurant at the end of the day on January 31: a S12.750 cash payment is made on that day . Destiny USA (formerly Carousel Mall in Syracuse, NY) had janitorial supplies costing $3,500 in stonage. An aditional $2,600 worth of supplies was purchased during January. At the end of January, $1,400 worth of janitorial supplies remained in storage. E An lowa State University employee works eight hours, at si5 per hour, on January 31: however payday is not until February 3. Answer from the university’s point of view. tWang Company paid $4,800 for a fire insurance policy on January 1. The policy covers 12 months beginning on January 1. Answer from Wang’s point of view. corporated has its delivery van repaired in January for $600 and charges the amount on account Company, a farm equipment company, receives its phone bill at the end of January for $154 for January calls. The bill has not been paid to date. n Hass artin Company receives and pays in January a $2.034 invoice (bill from a consulting firm for ser- ICCS received in January. Answer from Martin’s standpoint. services received and recorded p. Parillo’s Taxi 9 PVH Corp., manufacturer of 1ZOD, ARROW, Van Heusen, Calvin Klein, and Tommy Hilfiger Required in December. appurel, completes production of 450 men’s shirts ordered by Macy’s department stores at a cost of i each and delivers the order. Answer from PVH Corp.’s standpoint. of the transactions, if an expense is to be recognized in January, indicate the expense e amount. If an expense is not to be recognized in January, indicate why ing Financial Statement Effects of Various Transactions account and the Determining E3-5

Expert Answer

 

Expense Account Title Amount Reason for Recognition / non recognition
a Utilities Expense 3800 Expense has been incurred , though not yet billed
b Advertisement Expense 321 Amount of 963 will be divided equally in 3 months
c Salary Expense 201500 Out of 2 week payments , 1 week ending January 7 falls in current month
d As Revenue will arise in September with first game
Both Revenue and Expense will be recognised in September
e Amount is recorded in Inventory A/c which is Current Asset and not an expense
Amount will be expensed as and when an unit is sold
f Cost of Goods Sold 80000 Since all units are sold, complete cost of purchase will be expensed to
Cost of Goods Sold from Inventory A/c
g Since payment has been made for past dues, no expense is incurred
in January
h Commission Expense 15560 Since amount is linked to januray sales, it will be recorded in same month
i Amount will be charged to Equipment A/c which is an asset
j Cleasing Supplies Expense 4700 = 3500 + 2600 – 1400 , = 4700
Supplies consumed during the period will be expensed
k Salary Expense 120 Amount of salary for January 31 at 8 hours x $ 15 per hour
l Insurance Expense 400 Insurance Exense will be expensed over 12 months period
m Repair Expense 600 Since this does not improve any capacity of vehicle ,
it is thereby charged to repairs expense account
n Telephone Expense 154 Since amount is linked to januray calls, it will be recorded in same month
o Consulting Expense 2034 Since amount is incurred in januray it will be recorded in same month
p No entry as expense was incurred in December
q Cost of Goods Sold 4500 = 450 shirts x $ 10
Ordere is completed and delivered in January

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