Revenue Recognition The highway department contracted with a private company to collect tolls and maintain facilities on a turnpike. Users of the turnpike can pay cash as they approach the toll booth, or they can purchase a pass. The pass is equipped with an electronic sensor that subtracts the toll fee from the pass balance as the motorist slowly approaches a special toll booth. The passes are issued in $10 increments. Refunds are available to motorists who do not use the pass balance, but they are issued very infrequently. Last year, $3,000,000 was collected at the traditional toll booths, $2,000,000 of passes were issued, and $1,700,000 of passes were used at the special toll booth. How much should the company recognize as revenue for the year? Explain how the revenue recognition rule should be applied in this case.

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Answer 1

Textbook Question

Chapter 4, Problem 4.1E

Revenue Recognition

The highway department contracted with a private company to collect tolls and maintain facilities on a turnpike. Users of the turnpike can pay cash as they approach the toll booth, or they can purchase a pass. The pass is equipped with an electronic sensor that subtracts the toll fee from the pass balance as the motorist slowly approaches a special toll booth. The passes are issued in $10 increments. Refunds are available to motorists who do not use the pass balance, but they are issued very infrequently. Last year, $3,000,000 was collected at the traditional toll booths, $2,000,000 of passes were issued, and $1,700,000 of passes were used at the special toll booth. How much should the company recognize as revenue for the year? Explain how the revenue recognition rule should be applied in this case.

Expert Solution & Answer

To determine

Concept Introduction:

Profit is calculated by reducing all the expenses from the total income of the company. All expenses include the cost of goods sold, administration expenses, selling expenses and some other expenses. Revenue is recorded when business earn it not when it recovers from customer.

To Explain: Amount of revenue and rule of revenue recognition.

Explanation of Solution

Company record revenue of $ 4700000 (3000000+1700000) and refund of $ 300000 (2000000-1700000) made to the customer against the passes not used. Revenue is recorded when it earns. So in this case all income received in cash is recorded as income and all passes that used on toll is also recorded as income but those passes which cannot be used is refunded to the customer.

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On December 31, calculated the payroll, which indicates gross earnings for wages ($460,000), payroll deductions for income tax ($48,000), payroll deductions for FICA ($40,000), payroll deductions for United Way ($6,000), employer contributions for FICA (matching), and state and federal unemployment taxes ($4,000). Employees were paid in cash, but payments for the corresponding payroll deductions have not been made and employer taxes have not yet been recorded. Collected rent revenue of $2,100 on December 10 for office space that Sandler rented to another business. The rent collected was for 30 days from December 12 to January 10 and was credited in full to Deferred Revenue. Required: 1. & 2. Prepare the entries required on December 31 to record payroll, the collection of rent on December 10 and adjusting journal entry on December 31. 3. Show how any liabilities related to these items should be reported on the company’s balance sheet at December 31

Answer 2

Textbook Question

Chapter 4, Problem 4.1E

Revenue Recognition

The highway department contracted with a private company to collect tolls and maintain facilities on a turnpike. Users of the turnpike can pay cash as they approach the toll booth, or they can purchase a pass. The pass is equipped with an electronic sensor that subtracts the toll fee from the pass balance as the motorist slowly approaches a special toll booth. The passes are issued in $10 increments. Refunds are available to motorists who do not use the pass balance, but they are issued very infrequently. Last year, $3,000,000 was collected at the traditional toll booths, $2,000,000 of passes were issued, and $1,700,000 of passes were used at the special toll booth. How much should the company recognize as revenue for the year? Explain how the revenue recognition rule should be applied in this case.

Expert Solution & Answer

To determine

Concept Introduction:

Profit is calculated by reducing all the expenses from the total income of the company. All expenses include the cost of goods sold, administration expenses, selling expenses and some other expenses. Revenue is recorded when business earn it not when it recovers from customer.

To Explain: Amount of revenue and rule of revenue recognition.

Explanation of Solution

Company record revenue of $ 4700000 (3000000+1700000) and refund of $ 300000 (2000000-1700000) made to the customer against the passes not used. Revenue is recorded when it earns. So in this case all income received in cash is recorded as income and all passes that used on toll is also recorded as income but those passes which cannot be used is refunded to the customer.

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Answer 3

Textbook Question

Chapter 4, Problem 4.1E

Revenue Recognition

The highway department contracted with a private company to collect tolls and maintain facilities on a turnpike. Users of the turnpike can pay cash as they approach the toll booth, or they can purchase a pass. The pass is equipped with an electronic sensor that subtracts the toll fee from the pass balance as the motorist slowly approaches a special toll booth. The passes are issued in $10 increments. Refunds are available to motorists who do not use the pass balance, but they are issued very infrequently. Last year, $3,000,000 was collected at the traditional toll booths, $2,000,000 of passes were issued, and $1,700,000 of passes were used at the special toll booth. How much should the company recognize as revenue for the year? Explain how the revenue recognition rule should be applied in this case.

Expert Solution & Answer

To determine

Concept Introduction:

Profit is calculated by reducing all the expenses from the total income of the company. All expenses include the cost of goods sold, administration expenses, selling expenses and some other expenses. Revenue is recorded when business earn it not when it recovers from customer.

To Explain: Amount of revenue and rule of revenue recognition.

Explanation of Solution

Company record revenue of $ 4700000 (3000000+1700000) and refund of $ 300000 (2000000-1700000) made to the customer against the passes not used. Revenue is recorded when it earns. So in this case all income received in cash is recorded as income and all passes that used on toll is also recorded as income but those passes which cannot be used is refunded to the customer.

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Answer 4

Textbook Question

Chapter 4, Problem 4.1E

Revenue Recognition

The highway department contracted with a private company to collect tolls and maintain facilities on a turnpike. Users of the turnpike can pay cash as they approach the toll booth, or they can purchase a pass. The pass is equipped with an electronic sensor that subtracts the toll fee from the pass balance as the motorist slowly approaches a special toll booth. The passes are issued in $10 increments. Refunds are available to motorists who do not use the pass balance, but they are issued very infrequently. Last year, $3,000,000 was collected at the traditional toll booths, $2,000,000 of passes were issued, and $1,700,000 of passes were used at the special toll booth. How much should the company recognize as revenue for the year? Explain how the revenue recognition rule should be applied in this case.

Expert Solution & Answer

To determine

Concept Introduction:

Profit is calculated by reducing all the expenses from the total income of the company. All expenses include the cost of goods sold, administration expenses, selling expenses and some other expenses. Revenue is recorded when business earn it not when it recovers from customer.

To Explain: Amount of revenue and rule of revenue recognition.

Explanation of Solution

Company record revenue of $ 4700000 (3000000+1700000) and refund of $ 300000 (2000000-1700000) made to the customer against the passes not used. Revenue is recorded when it earns. So in this case all income received in cash is recorded as income and all passes that used on toll is also recorded as income but those passes which cannot be used is refunded to the customer.

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Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

Expert Solution & Answer

To determine

Concept Introduction:

Profit is calculated by reducing all the expenses from the total income of the company. All expenses include the cost of goods sold, administration expenses, selling expenses and some other expenses. Revenue is recorded when business earn it not when it recovers from customer.

To Explain: Amount of revenue and rule of revenue recognition.

Explanation of Solution

Company record revenue of $ 4700000 (3000000+1700000) and refund of $ 300000 (2000000-1700000) made to the customer against the passes not used. Revenue is recorded when it earns. So in this case all income received in cash is recorded as income and all passes that used on toll is also recorded as income but those passes which cannot be used is refunded to the customer.

Answer 8

Expert Solution & Answer

To determine

Concept Introduction:

Profit is calculated by reducing all the expenses from the total income of the company. All expenses include the cost of goods sold, administration expenses, selling expenses and some other expenses. Revenue is recorded when business earn it not when it recovers from customer.

To Explain: Amount of revenue and rule of revenue recognition.

Explanation of Solution

Company record revenue of $ 4700000 (3000000+1700000) and refund of $ 300000 (2000000-1700000) made to the customer against the passes not used. Revenue is recorded when it earns. So in this case all income received in cash is recorded as income and all passes that used on toll is also recorded as income but those passes which cannot be used is refunded to the customer.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

To determine

Concept Introduction:

Profit is calculated by reducing all the expenses from the total income of the company. All expenses include the cost of goods sold, administration expenses, selling expenses and some other expenses. Revenue is recorded when business earn it not when it recovers from customer.

To Explain: Amount of revenue and rule of revenue recognition.

Answer 12

Explanation of Solution

Company record revenue of $ 4700000 (3000000+1700000) and refund of $ 300000 (2000000-1700000) made to the customer against the passes not used. Revenue is recorded when it earns. So in this case all income received in cash is recorded as income and all passes that used on toll is also recorded as income but those passes which cannot be used is refunded to the customer.

Answer 13

Ch. 4 - Revenue Recognition The highway department...Ch. 4 - Prob. 4.2.1E Ch. 4 - Prob. 4.2.2E Ch. 4 - Prob. 4.2.3E Ch. 4 - Prob. 4.3E Ch. 4 - Prob. 4.4E Ch. 4 - Prob. 4.5E Ch. 4 - Prob. 4.6.1E Ch. 4 - Prob. 4.6.2E Ch. 4 - Prob. 4.6.3E

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