Furniture Ltd. (Barbor) provided a deposit of $9,000 which was recorded as revenue when it was received on December 13. Barbor was not billed until January 2. The order was not shipped until after the year end on January 2. The remaining balance owing was recorded in accounts receivable and sales. The inventory was excluded from the ending inventory count as well. The issue is whether this is the appropriate time to record the revenue or if another time is more appropriate. The other issue is that the balance
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They each keep their own accounting books and have chosen the appropriate method of revenue recognition based on their operations. | | | | Pat's Electronics Division | | | | | Pat's Electronics Division sells computers through agents in various cities. Agents send orders and down payments to our company. The division then ships the goods F.O.B. shipping point directly to the customers. Revenue is recognized at the point of sale. | | | | | | | Additional
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theme Revenue Recognition R evenue is usually the largest single item in financial statements, and the issues involving revenue recognition are among the most important and difficult ones that standardsetters and accountants face. In recent years, concerns related to the recognition of revenue in accordance with Accounting Standards have heightened significantly. Quite often, companies end up tweaking the Revenue numbers, besides some other reasons. Recording revenue improperly is also a
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letter to shareholders. When should an expenditure be recorded as an asset rather than an expense? 1. Always 2. If the amount is material. 3. When future benefit exists. 4. President's letter to shareholders Recognition of expense related to amortization of an intangible asset illustrates which principle of accounting? 1. Historical cost. 2. Expense recognition. 3. Full disclosure. 4. Revenue recognition. Allowing firms to estimate rather than physically count inventory at interim (quarterly)
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Introduction Brandywine Homecare, a not-for-profit business, had revenues of $12 million in 2007. Expenses other than depreciation totaled 75 percent of revenues, and depreciation expense was $1.5 million. All revenues were collected in cash during the year and all expenses other than depreciation were paid in cash. My report will contain the answers to the following questions: 1. Construct Brandywine’s 2007 income statement. 2. What were Brandywine’s 2007 net income, total profit margin
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introduces two controversial financial accounting topics that arise in the software industry: revenue recognition and the capitalization of software development costs. Financial Accounting from a management perspective: With respect to revenue recognition, Microsoft argues that it will provide additional services throughout the life of the software it is selling, so it should defer revenue recognition on a part of the sale price. With respect to software development costs, accounting rules give
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Financial Accounting Standards Board ORIGINAL PRONOUNCEMENTS AS AMENDED Statement of Financial Accounting Concepts No. 5 Recognition and Measurement in Financial Statements of Business Enterprises Copyright © 2008 by Financial Accounting Standards Board. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission
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Intermediate Accounting Chapter 1 * Essential characteristics of accounting are (1) the identification, measurement, and communication of financial information about (2) economic entities to (3) interested parties * Financial accounting – process that culminates in the preparation of financial reports on the enterprise for use by both internal and external parties * Users – investors, creditors, managers, unions, and government agencies * financial statements – (1) the
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is provided in: • SAC 1 ‘Definition of the Reporting Entity’; • SAC 2 ‘Objective of General Purpose Financial Reporting’; • SAC 3 ‘Qualitative Characteristics of Financial Information’; and • SAC 4 ‘Definition and Recognition of the Elements of Financial Statements’. SAC 1 and SAC 2 will continue to apply in order to provide guidance for the IFRS application paragraphs. The ‘Framework’ will replace SAC 3 and SAC 4 which will be withdrawn. Although the ‘Framework’
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Homecare, a not-for-profit business, had revenues of $12 million in 2007. Expenses other than depreciation totaled 75 percent of revenues, which is $9 million, and depreciation expense was $1.5 million. Income statement is the one of the three financial statements. The other two are the balance sheet and the statement of the cash flows. Brandywine Homecare’s total profit margin of 12.5 percent shows that the homecare makes 12.5 cents on every dollar of total revenues. If the company doubled its depreciation
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