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.

Question

Want to see more full solutions like this?

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.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

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, $6,130,000 was collected at the traditional toll booths, $4,110,000 of passes were issued, and $3,490,000 of passes were used at the special toll booth. Which of the following statements shows the correct amount of revenue the company should recognize and reason why this is correct? Oa. Total revenue recognized would be $4,110,000 based on the passes issued during the year. Ob. Total revenue recognized would be $9,620,000 based on the total amount earned…

A government entity collects fees for the processing of certain permits. The processing of a permit would normally take a few minutes. The processing fee is collected upon issuance of the permit. This government entity would normally recognize revenue from permit fees. On a straight-line basis By reference to the stage of completion Upon collection of the fee When the significant risks and rewards are transferred to the customer The receipt of a performance bond or a security deposit id credited to a Liability account Revenue account Cash account a and c A certification on the availability of allotment is required before a disbursement of government funds is made. According to the GAM for NGAs, who shall issue this certification? Budget officer Chief accountant Head of the agency Requisitioning Individual The chief accountant shall charge obligations incurred against available allotment to ensure that The NCA is sufficient to meet the disbursement made There are no unreleased…

Collectors at Tollbooths A and B (see figure) have colluded to perpetrate a fraud. Each day, Tollbooth Collector B provides A with a number of toll tickets prestamped from Tollbooth B. The price of the toll from Point B to Point A is 35 cents. The fraud works as follows:Drivers entering the turnpike at distant points south of Point B will pay tolls up to $5. When these drivers leave the turnpike at Point A, they pay the full amount of the toll printed on their tickets. However, the toll-booth collector replaces the tickets collected from the drivers with the 35-cent tickets provided by Collector B, thus making it appear that the drivers entered the turnpike at Point B. The difference between the 35 cent tickets submitted as a record of the cash receipts and the actual amounts paid by the drivers is pocketed by Tollbooth Collector A and shared with B at the end of the day. Using this technique, Collectors A and B have stolen more than $20,000 in unrecorded tolls this year. What control…

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.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

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.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

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.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

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

Concept explainers

Videos

Explanation of Solution

Want to see more full solutions like this?

Chapter 4 Solutions