Your answer is incorrect.Daniel White signs a 1-year contract with Blossom Video. The terms of the contract are that Daniel is required to pay a nonrefundableinitiation fee of $88. No annual membership fee is charged in the first year. After the first year, membership can be renewed by payingan annual membership fee of $5 per month. Blossom determines that its customers, on average, renew their annual membership threetimes after the first year before terminating their membership. What amount of revenue should Blossom recognize in its first year?Revenue in first year$tA88.00

Revenue is an important indicator of the way a company is performing. A company is able to generate…

Answered: Daniel White signs a 1-year contract…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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ABC Inc, a telecommunications operator, entered into a contract with Mr. X on March 1, 20x2. In line with the contract, Mr. X will subscribe to ABC Inc's monthly plan for 12 months and in return Mr. X receives a free cellphone from ABC Inc. Mr. X will pay a monthly fee of P5,000. Mr. X will get immediately the handset after the contract signing. ABC Inc sells the same handset for P26,000 and the same monthly plan for P3,250 per month without the handset. Determine the revenue to recognized by H Inc. on April 30, 20x7. [A] 27,000 [B] 5,000 [C] 3,250 [D] 3,000
1. Debbie acquired a franchise to operate a donut shop from Dollar Donuts, Inc., for $100,000. She incurred anadditional $4,000 in legal costs to negotiate the terms with the franchiser. In five years, the franchise contract will berenegotiated. The current contract also states that there will be a $3, 000 annual fee plus a two percent charge basedon the store's annual revenue, which is expected to average 90,000 per year. What is the franchise cost that should becapitalized? a. $88,000 b. $92, 000 c. $100,000 d. $104,000
(Determine Transaction Price) Aaron’s Agency sells an insurance policy offered by Capital Insurance Company for a commission of $100 on January 2, 2017. In addition, Aaron will receive an additional commission of $10 each year for as long as the policyholder does not cancel the policy. After selling the policy, Aaron does not have any remaining performance obligations. Based on Aaron’s significant experience with these types of policies, it estimates that policyholders on average renew the policy for 4.5 years. It has no evidence to suggest that previous policyholder behaviorwill change.Instructions(a) Determine the transaction price of the arrangement for Aaron, assuming 100 policies are sold.(b) Determine the revenue that Aaron will recognize in 2017.
On January 1, 2019, Loud Company enters into a 2-year contract with a customer for an unlimited talk and 5 GB data wireless plan for $68.00 per month. The contract includes a smartphone for which the customer pays $289.00. Loud also sells the smartphone and monthly service plan separately, charging $649.00 for the smartphone and $68.00 for the monthly service for the unlimited talk and 5 GB data wireless plan. On July 1, 2019, the customer realizes that she needs less data in her wireless plan and downgrades to the unlimited talk and 2 GB data plan for the remaining term of the contract (18 months). The unlimited talk and 2 GB data plan is priced at $51.00 per month. The $51.00 per month is Loud’s current stand-alone price for this plan that is available to all customers. Required: 1. How should Loud account for this contract modification? 2. Provide Loud’s new monthly revenue recognition journal entry.
DITO Corp. a telecommunications operator, entered into a one-year contract with Kim on March 1, 20x7. In lined with the contract, Kim receives a free Apple I-phone handset from DITO, Kim will pay a monthly fee of P1,200. Kim gets the handset immediately after contract signature. DITO sells the same handset for P3,600 and the same monthly plans for P800 per month without handset. Allocate the transaction price to the performance obligations: the allocated transaction price to each performance obligations? a. None, since there is no contract b. P9,600 network service and P3,600 for Apple I-phone Handset c. P0 for network service and P13,200 for Apple I-phone Handset d. P10,473 network service and P3,927 for Apple I-phone Handset
Hunter Corporation pays an annual insurance premium of $8,500 to cover the lives of its board officers. According to the terms of the insurance contract, the cash surrender value of the policies increase from $10,000 to $11,500 during that year. The adjusting entry that Hunter would record at the end of the year to increase the cash surrender value would include a credit to Insurance Expense for $8,500. debit to Prepaid Insurance for $8,500. debit to Cash Surrender Value of Life Insurance for $1,500. credit to Cash for $1,500.
SmaGlo, Inc., a telecommunications operator, entered into a contract with Kim Dorothy on March 1,20x7. In line with the contract, Kim Dorothy subscribes for SmaGlo's monthly plan for 12 months and in retum Kim Dorothy receives a free Apple I-Phone handset from SmaGlo. Kim Dorothy will pay a monthly fee of P1,200. Kim Dorothy gets the handset immediately after contract signature. SmaGlo sells the same handsets for P2,400 and the same monthly plans for P800 per month without handset. On March 31,20x7, the amount of accounts receivable to be recorded A. 1,200 B. None
Peyton sells an office building and the associated land on May 1 of the current year. Under the terms of the sales contract, Peyton is to receive $2,679,000 in cash. The purchaser is to assume Peyton's mortgage of $1,607,400 on the property. To enable the purchaser to obtain adequate financing, Peyton is to pay the $32,148 in points charged by the lender. The broker's commission on the sale is $107,160. What is Peyton's amount realized? The amount realized by Peyton is $_________
Rashid subscribes into a 12-month platinum contract with OSN, which provides Rashid with a family plan (that includes 4 Disney Channels) and a free OSN HD Box for a price of QR 160 per month. OSN sells the OSN HD Box (for regular use) for QR 400. Advise OSŇ's accountant on how to recognize revenue from the above sale based on your expertise in the principles-based, five-step model in IFRS 15
Jack Closets, Inc. employs 27 employees earning an average of $1,550 per week. The company awards each employee three weeks of vacation per year. Vacation days neither accumulate nor vest if not taken in the year earned. During the current year, 25 of Jack's employees took their 3 full weeks while the other 2 employees were unable to take any vacation this year. Prepare the journal entry necessary to record Jack's vacation pay. (Record debits first, then credits. Exclude explanations from journal entries.) Account Vacation Wage Expense Cash Current Year 116,250 116,250
Sanjeev enters into a contract that pays him $1,000 each month for six months of continuous consulting services. In addition, there is a 40% chance the contract will pay an additional $3,000, depending on the outcome of the consulting contract. Sanjeev used the most likely amount to determine transaction price. After Sanjeev has recognized revenue for two months of the contract, he changes his assessment of the chance the contract will pay him $3,000 up to 70%. How much revenue would Sanjeev recognize in the third month of the contract? $2,500 O $1.500 $1,850 O $1,600
On January 2, 2020, Crane Company sells production equipment to Fargo Inc. for $46,000. Crane includes a 2-year assurance warranty service with the sale of all its equipment. The customer receives and pays for the equipment on January 2, 2020. During 2020, Crane incurs costs related to warranties of $930. At December 31, 2020, Crane estimates that $620 of warranty costs will be incurred in the second year of the warranty. Prepare the journal entry to record this transaction on January 2, 2020, and on December 31, 2020 (assuming financial statements are prepared on December 31, 2020). (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

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