Franchise arrangement and performance obligation The franchise involves a license to use the franchisor property, and sales of the goods and service in the name of franchisor. In the franchise transaction, the franchisor has multiple performance obligations, and the franchisor gives the selling rights to the franchisee in particular period. The franchisor should provide the start-up services to the franchisee. The revenue recognition principle The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) of the company is completed. To discuss: The timing of revenue recognition in franchise sales.
Franchise arrangement and performance obligation The franchise involves a license to use the franchisor property, and sales of the goods and service in the name of franchisor. In the franchise transaction, the franchisor has multiple performance obligations, and the franchisor gives the selling rights to the franchisee in particular period. The franchisor should provide the start-up services to the franchisee. The revenue recognition principle The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) of the company is completed. To discuss: The timing of revenue recognition in franchise sales.
Solution Summary: The author explains that the franchisor has multiple performance obligations and gives the selling rights to the franchisee in particular period. The revenue recognition principle refers to revenue that should be recognized in the time period, when the performance obligation is completed
The franchise involves a license to use the franchisor property, and sales of the goods and service in the name of franchisor. In the franchise transaction, the franchisor has multiple performance obligations, and the franchisor gives the selling rights to the franchisee in particular period. The franchisor should provide the start-up services to the franchisee.
The revenue recognition principle
The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) of the company is completed.
To discuss: The timing of revenue recognition in franchise sales.
Bodhi Company has three cost pools and two doggie products (leashes and collars). The activity cost pool
of ordering has the cost drive of purchase orders. The activity cost pool of assembly has a cost driver of
parts. The activity cost pool of supervising has the cost driver of labor hours. The accumulated data
relative to those cost drivers is as follows:
Expected Use of
Estimated
Cost Drivers by Product
Cost Drivers
Overhead
Leashes
Collars
Purchase orders
$260,000
70,000
60,000
Parts
400,000
300,000
500,000
Labor hours
300,000
15,000
10,000
$960,000
Instructions: (a) Compute the activity-based overhead rates. (b) Compute the costs assigned to leashes
and collars for each activity cost pool. (c) Compute the total costs assigned to each product.
Torre Corporation incurred the following transactions.
1. Purchased raw materials on account $46,300.
2. Raw Materials of $36,000 were requisitioned to the factory. An analysis of the materials requisition slips
indicated that $6,800 was classified as indirect materials.
3. Factory labor costs incurred were $55,900, of which $51,000 pertained to factory wages payable and
$4,900 pertained to employer payroll taxes payable.
4. Time tickets indicated that $50,000 was direct labor and $5,900 was indirect labor.
5. Overhead costs incurred on account were $80,500.
6. Manufacturing overhead was applied at the rate of 150% of direct labor cost.
7. Goods costing $88,000 were completed and transferred to finished goods.
8. Finished goods costing $75,000 to manufacture were sold on account for $103,000.
Instructions
Journalize the transactions.
Chapter 15 Assignment of direct materials, direct labor and
manufacturing overhead
Stine Company uses a job order cost system. During May, a summary of source documents reveals the
following.
Job Number Materials Requisition Slips Labor Time Tickets
429
430
$2,500
3,500
$1,900
3,000
431
4,400
$10,400
7,600 $12,500
General use
800
1,200
$11,200
$13,700
Stine Company applies manufacturing overhead to jobs at an overhead rate of 60% of direct labor cost.
Instructions
Prepare summary journal entries to record (i) the requisition slips, (ii) the time tickets, (iii) the
assignment of manufacturing overhead to jobs,