in class we discussed a number of situations where a seller could recognize(at least some) revenue...

in class we discussed a number of situations where a seller could recognize(at least some) revenue before it had fully completed every obligation under a contract which of the following items does NOT represent one of these situations
a) a partially fulfilled sales contract with multiple performance obligations
b) a sales contract where cash collection is not probable
c) a partially completed sales contract that qualifies for revenue recognition overtime
d) a bill-and-hold sale
e) a sales contract with a return policy

Solutions

Expert Solution

Revenue is recognised when the following conditions has been satisfied :

(a) The seller has transferred the significant risks and rewards of ownership of the goods to the buyer.
(b) The seller does not retain control over the goods or managerial involvement with them to the degree usually associated with ownership.
(c) The amount of revenue can be measured reliably.
(d) It is probable that the economic benefits associated with the transaction will flow to the seller.
(e) The costs incurred or to be incurred by the seller in respect of the transaction can be measured reliably.

In all the situations given in the question, we can recognise some part of the revenue except in situation b i.e. a sales contract where cash collection is not probable From the above we can see that the one of the conditions for revenue recognition is "It is probable that the economic benefits associated with the transaction will flow to the seller".

Hence, in option b i.e. a sales contract where cash collection is not probable, we cannot recognize revenue.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

As we discussed the call options, there are three situations where the buyer could be facing...

As we discussed the call options, there are three situations where the buyer could be facing any time during the period of the option and at the exercise time, and where he stands financially, should he decide to exercise . In the money , at the money and out of the money. Please use those situations and assume an example in monetary amount within two types of currencies exchanged (between two countries). Under what conditions should the buyer exercise or...

As we discussed the call options, there are three situations where the buyer could be facing...

As we discussed the call options, there are three situations where the buyer could be facing any time during the period of the option and at the exercise time, and where he stands financially, should he decide to exercise . In the money , at the money and out of the money. Please use those situations and assume an example In monetary amount and two types of currencies exchanged (between two countries). Under what conditions the buyer should or should...

4. As we discussed in class, revenue from gambling is, in some states, generating more revenue...

4. As we discussed in class, revenue from gambling is, in some states, generating more revenue than the corporate income tax. There a several reasons/issues that exist in the current corporate tax model being utilized by the states. However, we also know that state and local governments are increasing relying on gambling to generate revenue to support their financial plans. Please explain some of the reasons for the reduction in corporate tax revenues, and the policy makers should be aware...

In the Trade Talks: When is Tariff Revenue Bad Tax Revenue? excerpts we discussed in class,...

In the Trade Talks: When is Tariff Revenue Bad Tax Revenue? excerpts we discussed in class, Dr. Lucie Gadenne discussed the differences between rich and poor countries in regard to tariff use and revenue. Explain how the two types of countries differ in their use and reliance on tariffs. Then explain the recommendation they make for poor countries that would like to open up to free trade. Simplify in 2 sentences.

Consider the model of welfare discussed in class, where individuals are guaranteed at least a minimum...

Consider the model of welfare discussed in class, where individuals are guaranteed at least a minimum income of y and there is an implicit tax, t, applied to earnings. (a) Graph an individual's budget constraint under the welfare program, assuming the individual has no other non-labor income and could potentially earn a wage, w, if he/she chooses to work. Be sure to label all aspects of the graph, including the slopes of the budget line segments, the axes, and the...

In class we discussed the Molex case, where there was an issue around the lack of...

In class we discussed the Molex case, where there was an issue around the lack of information on the representation letter that was deemed to be unacceptable by the external auditors. This situation caused the external auditors to be removed and the CEO and CFO to be replaced. Please answer the following three (3) questions: Why is it important for management to include all relevant accounting, control, and other significant business matters in the representation letter? Why is the representation letter important...

For each of the following situations, indicate the amount of revenue that the government should recognize...

For each of the following situations, indicate the amount of revenue that the government should recognize in an appropriate governmental fund as well as in its government-wide statement of activities in its fiscal year ending December 31, 2021. Briefly justify your response, making certain that, as appropriate, you identify the key issue of concern. 1. In October 2020, a state received a federal grant of $300 million (in cash) to assist local law enforcement efforts. The federal government has established...

We discussed some of the theoretical aspects of the social discount rate (r) in class. The...

We discussed some of the theoretical aspects of the social discount rate (r) in class. The benchmark for cost-bene t analysis by the public sector was set by the O ce of Management & Budget (OMB) in 1992 to 7%. However, Obama's Council of Economic Advisers questioned this (see the policy paper posted under additional reading). In the 1970s, the OMB used 10%, and then lowered it in the 1980s to 8%. In the 1950s, the Army Corps of Engineers...

In considering real-world situations, we must recognize the fact that by "wages" in this chapter, we...

In considering real-world situations, we must recognize the fact that by "wages" in this chapter, we mean the following, except the Multiple Choice total price that employers pay to obtain labor. total income earned by households. total compensation of workers. total of direct payments and fringe benefits to workers.

1. determine when the seller should recognize revenue. 2. Explain your answer using GAAP revenue recognition guidelines....

1. determine when the seller should recognize revenue. 2. Explain your answer using GAAP revenue recognition guidelines. 3. Explain how each transaction would appear on the income statement and balance sheet for 2017. Case 3-Your company sells a product bundle of software that includes a 3 year service contract for $100,000, Your company installed the software on July 1, 2018, and the client paid $50,000 cash. Thebalance is due on December 31, 2018. Identify the performance obligations and the revenue in...

Subjects