Imagine yourself as the accountant of Chong Berhad. Your managing director has approached you regarding some issues about contract.
His doubt included:- (i) A modification to existing contract should be treated as a separate contact. (ii) If the agreed date of payment by a customer is later than the date on which services are transferred to that customer, part of the consideration should be treated as interest and not revenue. (iii) If a contract with customer provided warranty after service, the warranty represents a separate performance obligation, thus part of transaction price should be allocated for warranty.
Required:- In accordance with Malaysian Financial Reporting Standards (MFRS) 15 Revenue from Contracts with Customers, discuss the above issues. [8 marks]
In: Accounting
On February 1, 2021, Arrow Construction Company entered into a
three-year construction contract to build a bridge for a price of
$8,225,000. During 2021, costs of $2,090,000 were incurred, with
estimated costs of $4,090,000 yet to be incurred. Billings of
$2,608,000 were sent, and cash collected was $2,340,000.
In 2022, costs incurred were $2,608,000 with remaining costs
estimated to be $3,735,000. 2022 billings were $2,858,000, and
$2,565,000 cash was collected. The project was completed in 2023
after additional costs of $3,890,000 were incurred. The company’s
fiscal year-end is December 31. This project does not qualify for
revenue recognition over time.
Required:
1. Calculate the amount of revenue and gross
profit or loss to be recognized in each of the three years.
In: Accounting
A New York City daily newspaper called "Manhattan Today" charges an annual subscription fee of $108. Customers prepay their subscriptions and receive 270 issues over the year. To attract more subscribers, the company offered new subscribers the ability to pay $110 for an annual subscription that also would include a coupon to receive a 40% discount on a one-hour ride through Central Park in a horse-drawn carriage. The list price of a carriage ride is $100 per hour. The company estimates that approximately 30% of the coupons will be redeemed.
Required:
Prepare the journal entry to recognize the sale of 10 new subscriptions, clearly identifying the revenue or unearned revenue associated with each performance obligation.
In: Accounting
Presented below are 11 income statement items from Braun Company for the year ended December 31, 2020.
Sales revenue $2,700,000
Cost of goods sold 1,150,000
Interest revenue 15,000
Loss from abandonment of plant assets 45,000
Gain from extinguishment of debt 28,000
Selling expenses 290,000
Administrative expenses 190,000
Effect of change in estimated useful lives of fixed assets (included in administrative expenses) 35,000
Loss from earthquake 30,000
Gain on disposal of discontinued operation 50,000
Instructions
a. Using the information above, prepare a condensed multiple-step income statement. Assume a tax rate of 30% and 100,000 shares of common stock outstanding during 2020.
In: Accounting
Presented below are 11 income statement items from Braun Company for the year ended December 31, 2020.
Sales revenue $2,700,000
Cost of goods sold 1,150,000
Interest revenue 15,000
Loss from abandonment of plant assets 45,000
Gain from extinguishment of debt 28,000
Selling expenses 290,000
Administrative expenses 190,000
Effect of change in estimated useful lives of fixed assets (included in administrative expenses) 35,000
Loss from earthquake 30,000
Gain on disposal of discontinued operation 50,000
Instructions
b. Compute comprehensive income for Braun in 2020, assuming Braun had an unrealized holding loss on an available-for-sale debt investment, net of tax, $12,000.
In: Accounting
18) The Statement of cash flows provides information that may be useful in predicting future cash flows, evaluating financial flexibility, assessing liquidity, and identifying a company's financial needs. It is not, however, the best financial statement for learning about a firm's financial performance during a period. Information about a company's financial performance is provided by the income statement. Two basic principles-the revenue recognition principle and the matching concept-work to distinguish the income statement from the statement of cash flows. (a) Define the revenue recognition principle and the matching concept. (b) Briefly explain how these two principles work to make the income statement a better report regarding a firm's periodic financial performance than the statement of cash flows.
In: Accounting
"A manufacturing company has just received an order with the following financial data. All dollar values are given in constant dollars, and inflation will impact the annual revenue, annual operating cost, and the salvage value. The two-year project requires immediately purchasing equipment for $59,000. The equipment falls into the MACRS 5-year class. The machine will be sold for $19,000 at the end of two years. The project will bring in additional annual revenue of $99,000, but it is expected to incur an additional annual operating cost of $37,000. The firm expects a general inflation rate of 5% per year during the project period. The firm's tax rate is 43%, and its market interest rate is 15%. What is the net present worth of this project?"
In: Finance
"A manufacturing company has just received an order with the following financial data. All dollar values are given in constant dollars, and inflation will impact the annual revenue, annual operating cost, and the salvage value. The two-year project requires immediately purchasing equipment for $56,000. The equipment falls into the MACRS 5-year class. The machine will be sold for $22,000 at the end of two years. The project will bring in additional annual revenue of $82,000, but it is expected to incur an additional annual operating cost of $34,000. The firm expects a general inflation rate of 6% per year during the project period. The firm's tax rate is 34%, and its market interest rate is 16%. What is the net present worth of this project?"
In: Finance
"A manufacturing company has just received an order with the following financial data. All dollar values are given in constant dollars, and inflation will impact the annual revenue, annual operating cost, and the salvage value. The two-year project requires immediately purchasing equipment for $56,000. The equipment falls into the MACRS 5-year class. The machine will be sold for $22,000 at the end of two years. The project will bring in additional annual revenue of $82,000, but it is expected to incur an additional annual operating cost of $34,000. The firm expects a general inflation rate of 6% per year during the project period. The firm's tax rate is 34%, and its market interest rate is 16%. What is the net present worth of this project?"
In: Finance
1. Suppose the equilibrium price for an average hospital stay in the absence of insurance is $10,000. At that price, 1000 people are hospitalized each year. Now suppose an insurer offers a policy to lower the out of pocket price of a stay to $100, and at that price, 1200 people are hospitalized.
a) How much TOTAL premium revenue must be collected to finance this arrangement?
b) How much premium revenue per hospitalized person must be collected? Would the average person be willing to pay this premium if they were risk averse?
c) Now suppose there are 120,000 people near this hospital, all of whom think they have an equal chance (1%) of being hospitalized. What must the per person premium be now?
In: Advanced Math