Performance obligation: Performance obligation is the promise made by the seller to supply the goods and service to the customer on or before the contract. Warranty: Warranty is the practice of normal business for quality assurance. It is obligation of the seller to make repairs or replace the product if there is any defect or unsatisfactory in future. Deferred revenues: Collection of cash in advance to render service or to deliver goods in future is known as unearned revenues. These unearned revenues are considered as liabilities until they are earned. For the portion of rendered services or delivered goods, revenues would be recognized by way of passing an adjusting entry. Unearned revenue is also known as deferred revenues, because at the receiving of payment in advance, revenues are not recognized but deferred until they are earned. Rules of Debit and Credit: Following rules are followed for debiting and crediting different accounts while they occur in business transactions: Debit , all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities. Credit , all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses. To determine: The number of performance obligations included in the Pro tab package.

Question

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Answer 1

Question

Chapter 5, Problem 5.2P

Requirement – 1

To determine

Performance obligation:

Performance obligation is the promise made by the seller to supply the goods and service to the customer on or before the contract.

Warranty:

Warranty is the practice of normal business for quality assurance. It is obligation of the seller to make repairs or replace the product if there is any defect or unsatisfactory in future.

Deferred revenues:

Collection of cash in advance to render service or to deliver goods in future is known as unearned revenues. These unearned revenues are considered as liabilities until they are earned. For the portion of rendered services or delivered goods, revenues would be recognized by way of passing an adjusting entry. Unearned revenue is also known as deferred revenues, because at the receiving of payment in advance, revenues are not recognized but deferred until they are earned.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.

Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To determine: The number of performance obligations included in the Pro tab package.

Requirement – 2

To determine

The amount of contract price allocated to each performance obligation.

Requirement – 3

To determine

To prepare: The journal entry for sales of pro tab packages.

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81 PROBLEMS Problem 3-1 (IAA) repair warranty The sale price for each set is P15,000. The average repair cost per set is P800. Research has shown that 20% of all sets sold are repaired in thế first year and 40% in the second year. 2020 2021 300 500 150,000 Number of sets sold 40,000 Total payments'for warranty repairs Required: 1. Prepare journal entries in connection with the warranty using the "expense as incurred" approach. 2. Prepare journał entries in connection with the warranty using the "accrual" approach. 3. Determiņe the estimated warranty liability on December 31, 2021 4. Analyze the estimated warranty liability account to ascertain whether actual warranty costs approximate the estimate. The sales and warrantý repairs are made evenly during the year. 5. Prepare journal entry to correct the estimated warranty liability on December 31, 2021. 82 Problem 3-2 (AICPA Adapted) In 2020, Dare Company bęgan selling

8,10

Answers for Numbers 4 and 5 only

Answer 2

Question

Chapter 5, Problem 5.2P

Requirement – 1

To determine

Performance obligation:

Performance obligation is the promise made by the seller to supply the goods and service to the customer on or before the contract.

Warranty:

Warranty is the practice of normal business for quality assurance. It is obligation of the seller to make repairs or replace the product if there is any defect or unsatisfactory in future.

Deferred revenues:

Collection of cash in advance to render service or to deliver goods in future is known as unearned revenues. These unearned revenues are considered as liabilities until they are earned. For the portion of rendered services or delivered goods, revenues would be recognized by way of passing an adjusting entry. Unearned revenue is also known as deferred revenues, because at the receiving of payment in advance, revenues are not recognized but deferred until they are earned.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.

Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To determine: The number of performance obligations included in the Pro tab package.

Requirement – 2

To determine

The amount of contract price allocated to each performance obligation.

Requirement – 3

To determine

To prepare: The journal entry for sales of pro tab packages.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 5, Problem 5.2P

Requirement – 1

To determine

Performance obligation:

Performance obligation is the promise made by the seller to supply the goods and service to the customer on or before the contract.

Warranty:

Warranty is the practice of normal business for quality assurance. It is obligation of the seller to make repairs or replace the product if there is any defect or unsatisfactory in future.

Deferred revenues:

Collection of cash in advance to render service or to deliver goods in future is known as unearned revenues. These unearned revenues are considered as liabilities until they are earned. For the portion of rendered services or delivered goods, revenues would be recognized by way of passing an adjusting entry. Unearned revenue is also known as deferred revenues, because at the receiving of payment in advance, revenues are not recognized but deferred until they are earned.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.

Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To determine: The number of performance obligations included in the Pro tab package.

Requirement – 2

To determine

The amount of contract price allocated to each performance obligation.

Requirement – 3

To determine

To prepare: The journal entry for sales of pro tab packages.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 5, Problem 5.2P

Requirement – 1

To determine

Performance obligation:

Performance obligation is the promise made by the seller to supply the goods and service to the customer on or before the contract.

Warranty:

Warranty is the practice of normal business for quality assurance. It is obligation of the seller to make repairs or replace the product if there is any defect or unsatisfactory in future.

Deferred revenues:

Collection of cash in advance to render service or to deliver goods in future is known as unearned revenues. These unearned revenues are considered as liabilities until they are earned. For the portion of rendered services or delivered goods, revenues would be recognized by way of passing an adjusting entry. Unearned revenue is also known as deferred revenues, because at the receiving of payment in advance, revenues are not recognized but deferred until they are earned.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.

Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To determine: The number of performance obligations included in the Pro tab package.

Requirement – 2

To determine

The amount of contract price allocated to each performance obligation.

Requirement – 3

To determine

To prepare: The journal entry for sales of pro tab packages.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 5

Chapter 5, Problem 5.2P

Requirement – 1

To determine

Performance obligation:

Performance obligation is the promise made by the seller to supply the goods and service to the customer on or before the contract.

Warranty:

Warranty is the practice of normal business for quality assurance. It is obligation of the seller to make repairs or replace the product if there is any defect or unsatisfactory in future.

Deferred revenues:

Collection of cash in advance to render service or to deliver goods in future is known as unearned revenues. These unearned revenues are considered as liabilities until they are earned. For the portion of rendered services or delivered goods, revenues would be recognized by way of passing an adjusting entry. Unearned revenue is also known as deferred revenues, because at the receiving of payment in advance, revenues are not recognized but deferred until they are earned.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.

Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To determine: The number of performance obligations included in the Pro tab package.

Requirement – 2

To determine

The amount of contract price allocated to each performance obligation.

Requirement – 3

To determine

To prepare: The journal entry for sales of pro tab packages.

Answer 6

Chapter 5, Problem 5.2P

Requirement – 1

To determine

Performance obligation:

Performance obligation is the promise made by the seller to supply the goods and service to the customer on or before the contract.

Warranty:

Warranty is the practice of normal business for quality assurance. It is obligation of the seller to make repairs or replace the product if there is any defect or unsatisfactory in future.

Deferred revenues:

Collection of cash in advance to render service or to deliver goods in future is known as unearned revenues. These unearned revenues are considered as liabilities until they are earned. For the portion of rendered services or delivered goods, revenues would be recognized by way of passing an adjusting entry. Unearned revenue is also known as deferred revenues, because at the receiving of payment in advance, revenues are not recognized but deferred until they are earned.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.

Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To determine: The number of performance obligations included in the Pro tab package.

Answer 7

Chapter 5, Problem 5.2P

Requirement – 1

To determine

Performance obligation:

Performance obligation is the promise made by the seller to supply the goods and service to the customer on or before the contract.

Warranty:

Warranty is the practice of normal business for quality assurance. It is obligation of the seller to make repairs or replace the product if there is any defect or unsatisfactory in future.

Deferred revenues:

Collection of cash in advance to render service or to deliver goods in future is known as unearned revenues. These unearned revenues are considered as liabilities until they are earned. For the portion of rendered services or delivered goods, revenues would be recognized by way of passing an adjusting entry. Unearned revenue is also known as deferred revenues, because at the receiving of payment in advance, revenues are not recognized but deferred until they are earned.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.

Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To determine: The number of performance obligations included in the Pro tab package.

Answer 8

Requirement – 2

To determine

The amount of contract price allocated to each performance obligation.

Answer 9

Requirement – 2

To determine

The amount of contract price allocated to each performance obligation.

Answer 10

Requirement – 3

To determine

To prepare: The journal entry for sales of pro tab packages.

Answer 11

Requirement – 3

To determine

To prepare: The journal entry for sales of pro tab packages.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 5 - What are the five key steps a company follows to...Ch. 5 - What indicators suggest that a performance...Ch. 5 - What criteria determine whether a company can...Ch. 5 - We recognize service revenue either at one point...Ch. 5 - What characteristics make a good or service a...Ch. 5 - Prob. 5.6Q Ch. 5 - What must a contract include for the contract to...Ch. 5 - When a contract includes an option to buy...Ch. 5 - Prob. 5.9Q Ch. 5 - Prob. 5.10Q

Solution Summary: The author explains that the number of performance obligations in the Pro tab package is two.

The amount of contract price allocated to each performance obligation.

To prepare: The journal entry for sales of pro tab packages.

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Chapter 5 Solutions