1. Electric Utility Bills
Revenue of the Electric Company can be measured given the amount of electricity generated for the year multiplied by the per-kilowatt/hour charge to customers. This is because the electric service has already been provided and distributed to customers for ready consumption
2. Retainer Fee
The amount of revenue to be counted in 2010 is $5,000 from the $10,000 retainer fee good for 1 year. This is because, despite the fact that there was no way of knowing how often, or when, the client would request advice, the fee is paying for the certainty of the law firm’s availability and expertise at any point where these are needed by the client. The ...view middle of the document...
This methodology makes a difference to the owner’s equity as opposed to recognizing these as inventory because inventory is normally credited at the time of recording of revenues and represented as Cost of Goods Sold (-), whereas unbilled receivables represent actual revenues or service delivery for which payments have just not yet been received (+).
6. Premium Coupons
The allowance to be made for these coupons can be 1 of 2 methods, either way consistent with the matching concept or the materiality concept. 1 method would require allowances to be equal to 20% of coupons issued multiplied by $0.60 each for grocer reimbursements. This is because allowances are projected estimates of allowances based on historical data. The 2nd method is, where estimates are relatively difficult to determine, allowances are recorded when such occur and in this case would be 10% of coupons issued. Either way both represent immaterial deductions. The allowance should be made here to the revenues for Tea as the coupons are being charged in the first place to tea purchases.
7. Traveler’s Checks
The bank should record revenues as follows:
* Revenue from Sale of Traveler’s Checks – $505
* Less: Cost of Goods Sold - $500
Assets under the balance sheet representing Traveler’s Checks inventory will be credited in the process for $500 (corresponding to Cost of Goods Sold). Cash and Owner’s Equity will then have an increase of $5 each representing the 1% charge for the service.
8. Product Repurchase Agreement
*Considering July 1, 2010 in the problem might be a typographical error,...