Answer:
Explanation:
Journalizing is the approach taken by corporate organizations for recording daily operations and transactions in the organization. Organizations use it to produce the final accounts and assess the company's performance and productivity.
Assuming:
the current net income of the Tran Corp. = $510,000 &
A cash dividend of $1.10 / common share is paid by Tran Corp.
Then:
To record entry for income of Trans Corp:
Description Debit ($) Credit($)
Investment - Tran Corp. stock
(510000*(160000/400000) 204000
Tran Corp COmpany Income 204000
(To record income of Tran Corp Company)
The entry record for dividend received by cash:
Description Debit ($) Credit ($)
Cash (160000/1.10) 145,455
Investment - Tran Corp stock 145,455
(Record recieved dividend)
The Sneed Corporation issues 10,000 shares of $50 par preferred stock for cash at $75 per share. The entry to record the transaction will consist of a debit to Cash for $750,000 and a credit or credits to a.Paid-In Capital from Preferred Stock for $750,000 b.Preferred Stock for $500,000 and Retained Earnings for $250,000 c.Preferred Stock for $500,000 and Paid-In Capital in Excess of Par—Preferred Stock for $250,000 d.Preferred Stock for $750,000
Answer:
b) Preferred Stock for $500,000.00 and Paid-In Capital in Excess of Par-Preferred Stock for $250,000.00
Explanation:
Based on the information given The Appropriate journal entry to record the transaction will consist of a debit to Cash for $750,000 and a credit or credits to PREFERRED STOCK FOR $500,000.00 and PAID-IN CAPITAL IN EXCESS OF PAR-PREFERRED STOCK FOR $250,000.00
Dr Cash $750,000
(10,000 shares *$75)
Cr Preferred Stock for $500,000.00
(10,000 shares *$50)
Cr Paid-In Capital in Excess of Par-Preferred Stock for $250,000.00
($750,000-$500,000]
The operating income calculated using variable costing and absorption costing amounts to $9,100 and $11,200. There were no beginning inventories. Determine the total fixed manufacturing overhead that will be expensed under absorption costing for the year.
Answer:
$2,100
Explanation:
The difference between variable costing income and absorption costing income arises due to fixed cost deferred in inventory. This is the total fixed manufacturing overhead that will be expensed under absorption costing.
Calculation :
Fixed Cost in Inventory = $11,200 - $9,100
= $2,100
There are several attempts to explain Marvels Success via competetive strategy but they fall flat: competitve strategy, with this specific case neither predicts nor explains the outcome why?
Answer:
It has been a well known fact that competitive strategy creates a unique value for a target set of movie customers. However, it is not able to predict nor explain the outcome due to the fact that Marvel only focused on trying to compete to be the best in comic and superhero films which thus resulted in basically a case whereby there was a competition in which one participant wins totally and another loses without gaining any objectives and thus they were not able to win.
Explanation:
This question is taken from a book titled "The Marvel Way: Restoring a Blue Ocean". It was written by W. Chan Kim, Renee Mauborgne, Michael Olenick. The central theme of the book was about one of the greatest turnarounds in modern business history by the then Marvel CEO with the name Peter Cuneo who was responsible for turning the business around and succeeded in launching a blue ocean.
From the question, neither predicts nor explains the outcome because;
It has been a well known fact that competitive strategy creates a unique value for a target set of movie customers. However, it is not able to predict nor explain the outcome due to the fact that Marvel only focused on trying to compete to be the best in comic and superhero films which thus resulted in basically a case whereby there was a competition in which one participant wins totally and another loses without gaining any objectives and thus they were not able to win.
When the economy is in short-run equilibrium, Group of answer choices there are increases in inventory. people want to buy more than will be produced. there are decreases in inventory. total expenditures equal total production.
Answer:
total expenditures equal total production.
Explanation:
In the case when the economy is in the short-run equilibrium that means the total expenditures should be equivalent to the total production. In other words, we can say that the expenditure that can be incurred should be equal to the production
Hence, the last option is correct
Scenario 34-1. Take the following information as given for a small, imaginary economy: When income is $10,000, consumption spending is $6,500. When income is $11,000, consumption spending is $7,250. Refer to Scenario 34-1. The marginal propensity to consume (MPC) for this economy is
Answer:
0.75
Explanation:
Marginal Propensity to Consume (MPC) is the change in consumption due to change in income
Change in consumption = $7,250 - $6,500 = $750
Change in income = $11,000 - $10,000 = $1,000
MPC = Change in consumption / Change in income
MPC = 750 / 100
MPC = 0.75
During January, Dream House Builders, Inc. incurred $550 of actual indirect materials costs, as supported by materials requisitions.
Required:
Draw the journal entry.
Answer and Explanation:
The journal entry is given below:
Factory overhead Dr $550
To Raw material inventory $550
(being the actual indirect material cost is recorded)
Here the factory overhead is debited as it increased the expense while the raw material inventory is credited as it decreased the assets
Winston Company reported net income of $50,000 for the year. During the year, accounts receivable decreased by $7,000, accounts payable increased by $3,000 and depreciation expense of $5,000 was recorded. Net cash provided by operating activities for the year is Group of answer choices $40,000. $65,000. $49,000. $45,000.
Answer:
$65000
Explanation:
Below is the calculation:
To find the net cash from the operating activity, we are required to add depreciation, accounts payable and accounts receivables.
Net income of the company = $50000
Add- expenses of depreciation = 5000
Add - Increase in accounts payable = 3000
Add - Decrease in accounts receivable = $7000
Thus net cash from operating activity = 50000 + 5000 + 3000 + 7000 = $65000
Acme Air Compressor Company has decided to limit the number of compressors it will supply to some of its distributors that it suspects are selling a line of compressors made by one of its competitors. Acme is using its referent power in its distribution channel.
a. True
b. False
Answer:
b. False
Explanation:
A Referent power in an organization my be defined as the power of a person or a company that is based on high level of identification with that of admiration or inspiration or out of respect.
Thus in the context, the Acme company does not uses its referent power to its distribution channel when the company decides to limit the supply of the its compressors to some of its distributors as the distributors are selling some of the air compressors of the competitor company.
Hence the answer is FALSE.
gThe following data are available for Martin Solutions, Inc. Year 2 Year 1 Sales $1,139,600 $1,192,320 Beginning inventory 80,000 64,000 Cost of goods sold 500,800 606,000 Ending inventory 72,000 80,000 Required: Assume a 365-day year. Determine for each year:
Answer and Explanation:
The computation is shown below;
For Year 1
Average inventory = (Beginning inventory + Ending inventory)÷ 2
= ($64,000 + $80,000) ÷ 2
= $72,000
Inventory turnover = Cost of goods sold ÷ Average inventory
= $606,000 ÷ 72,000
= 8.4 times
Days in inventory = 365 ÷ Inventory turnover ratio
= 365 ÷ 8.4
= 43.5 days
For Year 2
Average inventory = (Beginning inventory + Ending inventory) ÷ 2
= ($80,000 + $72,000) ÷ 2
= $76,000
Inventory turnover = Cost of goods sold ÷ Average inventory
= $500,800 ÷ 76,000
= 6.6 times
Days in inventory = 365 ÷ Inventory turnover ratio
= 365 ÷ 6.6
= 55.3 days
A cost-cutting project will decrease costs by $66,100 a year. The annual depreciation will be $15,750 and the tax rate is 35 percent. What is the operating cash flow for this project?
Answer:
$48,478
Explanation:
Calculation to determine What is the operating cash flow for this project
Operating cash flow = [$66,100 ×(1 -.35)] + [$15,750 ×.35]
Operating cash flow = [$66,100 ×.65)+5,513.
Operating cash flow = 42,965+5,513
Operating cash flow = $48,478
Therefore the operating cash flow for this project will be $48,478
In a 150 pax of guest dining in a restaurant, how will your facility be designed to accommodate that number of guests?
Answer:
To build the facility having compartments over one another.
Explanation:
The facility will be designed in a three compartment that are present on one another so then it will accommodate more number of guests. The building of compartment over one another can enable us to accommodate three times more people on the same piece of land so we can conclude that making the facility in the form of building over one another can accommodate more number of people.
The net asset value of shares in a closed-end investment company is $36. An investor buys the shares for $34 in the secondary market. The company distributes $1 and after one year, the net asset rises to $42. The investor sells the shares for $43 in the secondary market. What is the percentage return on the investment
Answer:
Closed-End Investment Company
The percentage return on the investment is:
= = 29.41%
Explanation:
a) Data and Calculations:
Net asset value of share = $36
Price paid by an investor = $34
Dividend distributed = $1
Net asset value after one year = $42
Selling price in the secondary market by the investor = $43
Total amount realized by the investor = $44 ($43 + $1)
Cost of investment = $34
Dollar return on the investment = $10 ($44 - $34)
Percentage return on the investment = Return on investment/Cost of investment * 100
= $10/$34 * 100
= 29.41%
You are an investment manager and one of your clients is a famous soccer player. She is promised to be paid $5million three years from now. What is the present value of this cash flow today
Answer:
$4,153,268.86
Explanation:
The below is missing from the question:
Your discount rate for real cash flows is 5% APR, compounded monthly and you are expecting inflation of 1.2% per year (APR, annual compounding).
We need to convert the real interest rate to an effective annual rate as shown thus:
EAR=(1+APR/n)^n-1
APR=5%
number of times interest is compounded annually=12
EAR=(1+5%/12)^12-1
EAR=5.12%
Nominal Discount rate = [(1+ Real Discount rate)*(1+Inflation Rate)] - 1
Nominal Discount rate =(1+5.12%)*(1+1.2%)-1
Nominal discount rate=6.38%
Present value=future value/(1+nominal discount rate)^3
future value=$5,000,0000
nominal discount rate=6.38%
n=3 years
PV=$5,000,000/(1+6.38%)^3
PV= $4,153,268.86
At the beginning of the year, Crane Company estimates annual overhead costs to be $2400000 and that 400000 machine hours will be operated. Using machine hours as a base, the amount of overhead applied during the year if actual machine hours for the year was 375000 hours is
Answer:
the amount of overhead applied during the year is $2,250,000
Explanation:
The computation of the overhead applied is shown below;
= Estimated annual overhead ÷ machine hours × actual machine hours
= $2,400,000 ÷ 400,000 machine hours × 375,000 hours
= $2,250,000
hence, the amount of overhead applied during the year is $2,250,000
Finisher Inc. sells merchandise of $250,000 in 2020 that includes a three-year limited warranty. Warranty costs are estimated to be 1% of sales. The company incurred actual costs of $800 in 2020 related to the warranties. a. Record the warranty accrual at the time of sale in 2020. b. Record the adjustment to the warranty accrual for actual warranty costs in 2020.
Answer: See explanation
Explanation:
a. Record the warranty accrual at the time of sale in 2020.
Debit Warranty expense = $250,000 × 1% = $2,500
Credit Warranty Liability $2,500
(To record the warranty accrual)
b. Record the adjustment to the warranty accrual for actual warranty costs in 2020.
Debit Warranty Liability $800
Credit Cash and Payables $800
Mary makes 10 pies and 20 cakes a day and her opportunity cost of producing a cake is 2 pies. Tim makes 20 pies and 10 cakes a day and his opportunity cost of producing a cake is 4 pies. If Mary and Tim specialize in the good in which they have a comparative advantage, _________
A. Mary produces only cakes while Tim produces only pies
B. Mary produces only pies
C. Tim produces both pies and cakes
D. Tim produces only cakes while Mary produces only pies
Answer:
A. Mary produces only cakes while Tim produces only pies
Explanation:
I will start by describing the concept called comparative advantage. Comparative advantage can be described as a businesses ability to produce at a reduced or lower opportunity cost than others. Given this definition, we can see that Mary's opportunity cost of producing cakes is lower than Tims opportunity cost. So Mary has an advantage over Tim in the production of cakes. So the answer to this question is A. Mary should specialize in the making of cakes while Tim should specalize in pie making
The manager of Quick Car Inspection reviewed the monthly operating costs for the past year. The costs ranged from $4,400 for 1,400 inspections to $4,200 for 1,000 inspections. Please use the high-low method to calculate the variable cost per inspection.
Answer:
Variable cost per unit= $0.5 per inspection
Explanation:
Giving the following information:
The costs ranged from $4,400 for 1,400 inspections to $4,200 for 1,000 inspections.
To calculate the variable cost under the high-low method, we need to use the following formula:
Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)
Variable cost per unit= (4,400 - 4,200) / (1,400 - 1,000)
Variable cost per unit= $0.5 per inspection
In a continuous review inventory system, the lead time for door knobs is weeks. The standard deviation of demand during the lead time is units. The desired cycle-service level is percent. The supplier of door knobs streamlined its operations and now quotes a 1 week lead time. Refer to the standard normal tableLOADING... for z-values. How much can the safety stock be reduced without reducing the percent cycle-service level? The safety stock can be reduced by nothing door knobs. (Enter your response rounded to the nearest whole number.)
Answer:
The answer is "116 doorknobs".
Explanation:
The standard deviation of the demand before the (four weeks) protection intervals = [tex]\sigma-d \times (\sqrt{L}) = 100 \ units\\[/tex]
The desired cycle service level is [tex]99\%[/tex].Therefore, [tex]z = 2.33[/tex]
The safety stocks for the four-weeks protecting interval are:
Safety stock [tex]= z\times [ \sigma-d \times (\sqrt{L})][/tex]
[tex]= 2.33 \times 100 \\\\= 233\ door\ knobs[/tex]
The safety stocks require for the one-week protection interval are: [tex]\sigma-dLT = \sigma-dt \times (\sqrt{L}) = \sigma-dt \times (\sqrt{4}) = 100\ door\ knobs\\\\\sigma-d = \frac{100}{(\sqrt{4})} = \frac{100}{2} = 50 \ door\ knobs\\\\[/tex]
Safety stock [tex]= z\times \sigma-dt = 2.33 \times 50 = 116.5 \ or\ 117 \ door\ knobs\\\\[/tex]
Safety stock reduction[tex]= 233 -117 = 116 \ door\ knobs[/tex]
Wolfe Company had the following beginning inventory and purchases during 2018 Date Transaction Number of units Unit Cost 1/1 Beginning inventory 2,000 $22.00 4/12 Purchase No. 1 2,300 $26.00 7/11 Purchase No. 2 800 $28.00 10/5 Purchase No. 3 1,250 $30.00 Wolfe sold 4,100 units Determine the amount of ending inventory and cost of goods sold using the following methods: Method Ending inventory Cost of Goods Sold LIFO FIFO Weighted average
Answer:
Wolfe Company
The amount of:
LIFO FIFO Weighted Average
Ending inventory $50,500 $65,100 $58,005
Cost of goods sold $113,200 $98,600 $105,698
Explanation:
a) Data and Calculations:
Date Transaction Number of units Unit Cost Cost Value
1/1 Beginning inventory 2,000 $22.00 $44,000
4/12 Purchase No. 1 2,300 $26.00 59,800
7/11 Purchase No. 2 800 $28.00 22,400
10/5 Purchase No. 3 1,250 $30.00 37,500
Total inventory available 6,350 $163,700
Wolfe sold 4,100
Ending Inventory 2,250
LIFO
Ending Inventory = $50,500 (250 * $26 + 2,000 * $22)
Cost of goods sold:
4/12 Purchase No. 1 2,050 $26.00 53,300
7/11 Purchase No. 2 800 $28.00 22,400
10/5 Purchase No. 3 1,250 $30.00 37,500
Total cost of goods sold = 4,100 $113,200
FIFO:
Ending Inventory = Cost of goods available for sale - Cost of goods sold
= $65,100 ($163,700 - $98,600)
Cost of goods sold:
1/1 Beginning inventory 2,000 $22.00 $44,000
4/12 Purchase No. 1 2,100 $26.00 54,600
Total cost of goods sold = $98,600
Weighted average:
Weighted average cost = $25.78 ($163,700/6,350)
Ending inventory = $58,005 (2,250 * $25.78)
Cost of goods sold = $105,698 (4,100 * $25.78)
The reporting of net cash provided or used by operating activities that lists the major items of operating cash receipts, such as receipts from customers, and subtracts the major items of operating cash disbursements, such as cash paid for merchandise, is referred to as the:
Direct method
Explanation:
Which of the following statements about striving to reduce labor costs per pair produced at each of the company's plants is true?
a. A company cannot achieve labor costs per pair produced that are close to the lowest in the industry (in those geographic regions where it has plants) unless its annual total compensation of plant workers is below the average annual total compensation paid by all companies with plants in these same regions.
b. All companies, regardless of the strategy being employed, should pursue actions to manage employee compensation and labor productivity in a manner that results in labor costs per pair produced that are equal to (or very close to) the industry-low in each region where the company has plants.
c. It is very difficult for a company producing branded footwear with a high S/Q rating to achieve labor costs per pair produced that are below the industry average in each geographic region where the company has plants.
d. A company pursuing a low-cost provider strategy is better able to pursue actions aimed at achieving low labor costs per pair produced in each of its plants (as compared to the labor costs of companies with plants in the same regions) than is a company pursuing a differentiation strategy.
e. It is more cost effective for a company to compensate plant workers at levels that are close to the highest in the industry in each geographic region where it has plants than it is for a company to pursue actions to keep labor costs per pair produced below the industry average in each geographic region where it has plants.
Answer:
b. All companies, regardless of the strategy being employed, should pursue actions to manage employee compensation and labor productivity in a manner that results in labor costs per pair produced that are equal to (or very close to) the industry-low in each region where the company has plants.
Explanation:
The less labor cost of production per pair could be attained in following two ways
1. The productivity level is icnreased
2. The compensation should be managed and it provides the combination of both fixed and variable. Also it pays the high compensation but at the more productivity rate due to which the labor cost per pair would fall
So as per the given situation, the option b is correct
Suppose the United States and Japan have the following production possibility tables:
Japan United States
Bolts of Cloth Tons of Wheat Bolts of Cloth Tons of Wheat
1,000 0 500 0
800 100 400 200
600 200 300 400
400 300 200 600
200 400 100 800
0 500 0 1,000
a. Draw each country’s production possibility curve.
b. In whatgooddoesthe United States have a comparative advantage?
c. Is there a possible trade that benefits both countries?
d. Draw their combinedproduction possibility curve. L04
Answer:
a) attached below
b) Wheat production
c) Yes there is a possible trade that benefits both countries
d) attached below
Explanation:
Opportunity cost can be expressed as
= Value/cost of alternative / value/cost of chosen alternative
a) Draw each country's production possibility curve
attached below
b) United state have a comparative advantage in Wheat production because of lower opportunity cost
c) The possible trade that would benefit both countries is when both countries trade on goods that they have lower comparative opportunity cost
i.e. Japan producing just Bolt cloths while United states produce Wheat alone
d) combined production possibility curve
attached below
Anthony Walker plans to invest $28,400 a year at the end of each year for the next seven years in an investment that will pay him a rate of return of 9.8 percent. How much money will Anthony have at the end of seven years
Answer:
267,785.95
Explanation:
28400 X (1.098)^7 = 267,785.95
g When a court awards custody of a child to one parent and not the other, this is an example of: Group of answer choices all of the answers are correct monetary relief monetary damages equitable relief
Answer:
equitable relief
Explanation:
A court refers to an enclosed space such as a hall or chamber where legal practitioners (judges, lawyers or attorneys and a jury) converge to hold judicial proceedings.
A lawyer refers to an individual who has obtained a law degree and is saddled with the responsibility of giving legal advice, initiate and execute lawsuits for his or her clients. These legal practitioners are saddled with the legal responsibility of listening to evidence and give a verdict about legal cases.
An equitable relief also referred to as equitable remedy can be defined as judicial remedies granted to an aggrieved person by a court of equity, requiring that the other party act or refrain from indulging in a specific act because ordinary legal remedies couldn't provide the aggrieved party sufficient (adequate) restitution for an offense commited against him or her. Thus, an equitable relief (remedy) is an injunction granted by a court of equity requiring a party to a contract to either act (mandamus or specific performance) or refrain from indulging in a particular act.
In this context, when a court of competent jurisdiction awards or grants custody of a child to one parent rather than awarding it to the other, this is an example of equitable relief.
In conclusion, an equitable relief or remedy is typically a nonmonetary judgement granted by a court of equity when ordinary legal remedies fail to provide sufficient (adequate) restitution to an aggrieved party.
On May 11, 2012, your calendar year firm pays $6,000 for a used computer server, its only asset purchase for the year, and estimates that the server will have a salvage value of $500. If no Section 179 deduction is taken, what is your firm’s maximum 2012 deduction for depreciation?
Answer:
Calendar-Year Firm
The firm’s maximum 2012 deduction for depreciation is:
= $917.
Explanation:
a) Data and Calculations:
Purchase of a used computer server on May 11, 2012 = $6,000
Since the server is a used one, we assume a four-year useful life
Salvage value = $500
Assumed useful life = 4 years
Depreciable amount = $5,500 ($6,000 - $500)
Since the firm does not take the Section 179 Deduction, which would have allowed it to expense the whole depreciable amount this 2012, the depreciation expense for the first year is calculated as follows:
Annual depreciation expense, using the straight-line method = $1,375
For 2012, the firm's maximum deduction for depreciation will be:
= $917 ($1,375 * 8/12) (covering the months from May 11 to December 31)
In (Noon) Company, direct materials are added at the beginning of the production process. Conversion costs are incurred evenly throughout the production process. Before inspection, some units are spoiled due to undetectable materials defects. Inspection occurs when units are 60% converted. Spoiled units generally constitute 6% of the good units. Data for December 2019 are as follows: WIP, beginning inventory 12/1/2019 Direct materials 22,500 units (100% complete) Conversion costs (55% complete) Started during December 76,700 units Completed and transferred out 12/31/2019 72,500 units WIP, ending inventory 12/31/2019 18,400 units Direct materials (100% complete) Conversion costs (65% complete) What is the number of normal spoilage units?
Answer:
Following are the responses to the given question:
Explanation:
Statement In December the computation of typical spoiling units shall be shown:
Particulars Units
WIP Inventory Start on 12 January 2019 22,500
Departments began in December 76,700
Total stock available for both the month 99,200
Less: transferred units on 31 December 2019 72,500
Inventory of Less: WIP on 31 December 2019 18,400
Inventory of Balance (Normal Spoilage units) 8,300
I’ll give 20 points to the best answer !!!
Answer:
The answer is "Slide Master View"
Explanation:
Slide Master Look is indeed the name of this feature. This can help you keep track of all the presentations you've created and change those ones that require work or even more information. The additional feature is the ability to change the presentation's actual picture, as it may be extended to all slides. Slide master view also allows you to change the text format & placeholders.
________ is the process of coordinating all messages, media and activities used by an organization to communicate with the market across different communication methods
Answer:
integrated Marketing communication
Explanation:
This method is used by firms and companies to brand their communications and also in their coordination. It makes sure that all the various forms of communications are well linked together. This would create a unified communication channel for the consumer during their interactions with the enterprise. the aspects it integrates includes, advertising, public relations, social media and promotion of sales.
The following data were accumulated for use in reconciling the bank account of Creative Design Co. for August 20Y6:
1. Cash balance according to the company’s records at August 31, $24,270.2. Cash balance according to the bank statement at August 31, $32,278.3. Checks outstanding, $14,668.4. Deposit in transit, not recorded by bank, $7,170.5. A check for $58 in payment of an account was erroneously recorded in the check register as $580.6. Bank debit memo for service charges, $12.A. Prepare a bank reconciliation, using the format shown in
B. If the balance sheet were prepared for Creative Design Co. on August 31 what amount should be reported for cash?
C. Must a bank reconciliation always balance (reconcile)
A) NoB) Yes.
Amount DescriptionsAdjusted balanceBank service chargeBank error in charging check as $58 instead of $580Bank error in charging check as $580 instead of $58Deposit in transit, not recorded by bankError in recording check as $58 instead of $580Error in recording check as $580 instead of $58Outstanding checksTotal adjustments
Answer:
Creative Design Co.
A. Bank Reconciliation Statement as of August 31:
Balance as per bank statement $32,278
Deposit in transit, $7,170
Checks outstanding, ($14,668)
Balance as per adjusted cash bal. $24,780
B. The amount that should be reported for cash is $32,278.
C. B) Yes. A bank reconciliation must always balance (reconcile), otherwise, the purpose of the reconciliation is defeated.
Explanation:
a) Data and Calculations:
1. Cash balance according to the company’s records at August 31, $24,270.
2. Cash balance according to the bank statement at August 31, $32,278
3. Checks outstanding, $14,668
4. Deposit in transit, not recorded by bank, $7,170
5. A check for $58 in payment of an account was erroneously recorded in the check register as $580.
6. Bank debit memo for service charges, $12
Cash Book Adjustment:
August 31 balance $24,270
add overstatement of check 522
less bank charges 12
Adjusted balance $24,780
Novak Financial Services performs bookkeeping and tax-reporting services to startup companies in the Oconomowoc area. On January 1, 2020, Novak entered into a 3-year service contract with Walleye Tech. Walleye promises to pay $10,900 at the beginning of each year, which at contract inception is the standalone selling price for these services. At the end of the second year, the contract is modified and the fee for the third year of services is reduced to $8,700. In addition, Walleye agrees to pay an additional $21,800 at the beginning of the third year to cover the contract for 3 additional years (i.e., 4 years remain after the modification). The extended contract services are similar to those provided in the first 2 years of the contract.
Required:
a. Prepare the journal entries for Tyler in 2019 and 2020 related to this service contract.
b. Prepare the journal entries for Tyler in 2020 related to the modified service contract, assuming a prospective approach.
c. Repeat the requirements for part (b), assuming Tyler and Walleye agree on a revised set of services (fewer bookkeeping services but more tax services) in the extended contract period and the modification results in a separate performance obligation
Answer: See explanation
Explanation:
a. 1 jan 2020
Debit Cash $10,900
Credit Unearned revenue $10,900
31st dec 2020
Debit Unearned revenue $10,900
Credit Service revenue $10,900
1 jan 2020
Debit Cash $10,900
Credit Unearned revenue $10,900
31st dec 2020
Debit Unearned revenue $10,900
Credit Service revenue $10,900
b. 1 Jan 2021
Debit Cash $30500
Credit Unearned revenue $30500
31st dec 2020
Debit Unearned revenue $7,625
Credit Service revenue $7,625 ($30500/4)
c. 1 Jan 2020
Debit Cash $30500
Credit Unearned revenue $30500
31st Dec 2020
Debit Unearned revenue $8,700
Credit Service revenue $8,700
