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    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 21 Aug 2017 My Price 13.00

Slattery Company

P18-2 Revenue Recognition Alternatives The Slattery Company was formed on January 1, 2007 to build a single product. The company issued no-par common stock on that date for $300,000 cash. The product costs $20 to make, all of which is paid in cash at the time of production. The company sells each unit of the product for $35 on credit and incurs sales com- missions per unit of $5 cash. In 2007 the company produced 10,000 units, shipped 9,000 units, and received payment for 8,000 units.

Required

1.      Prepare the 2007 income statement and ending balance sheet under each of the following methods:

a.    Revenue recognition at the time of sale (shipment)

b.   Revenue recognition during production

c.    Revenue recognition at the time of cash receipt

 

2.      Which method provides the most useful information to users? Under what circumstances would the other methods pro- vide more useful information?

3.      In 2008 the company produced 15,000 units, shipped 16,000 units, and received payment for 17,000 units. What conclu- sion can you make about the balance in Retained Earnings on December 31, 2008 for each method of revenue recognition?

 

Percentage of Completion In 2007 Dreyer Corporation began construction work under a three-year contract. The contract price is $800,000. Dreyer uses the percentage-of-completion method. The financial state- ment presentations relating to this contract on December 31, 2007   follow:

Balance Sheet

Accounts receivable

 

$15,000

Construction in progress

$50,000

 

Less contract billings

(47,000)

 

Cost of uncompleted contract in excess of billings

 

3,000

Income  Statement

Gross profit (before tax) on the contract                                                          $10,000

Required

1.      How much cash did Dreyer collect during 2007?

2.      What was the initial estimated total income before tax on this contract?

Answers

Maurice Tutor
(5)
Status NEW Posted 21 Aug 2017 04:08 PM My Price 13.00

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