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. Variable consideration: Variable consideration refers to the uncertain transaction price that depends upon the outcome of future events. 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 prepare: The journal entry on January 31 to record the collection of cash and recognition of the first month’s revenue.

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Answer 1

Question

Chapter 5, Problem 5.5P

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.

Variable consideration:

Variable consideration refers to the uncertain transaction price that depends upon the outcome of future events.

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 prepare: The journal entry on January 31 to record the collection of cash and recognition of the first month’s revenue.

Requirement – 2

To determine

To prepare: The journal entry on June 30 to record receipt of the bonus, and assume total cost saving exceed target.

Requirement – 3

To determine

To prepare: The journal entry on June 30 to record payment of the penalty.

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Current Attempt in Progress $103200 Marigold Company enters into a contract with a customer to build a warehouse for $400700, with a performance bonus of that will be paid based on the timing of completion. The amount of the performance bonus decreases by 20% per week for every week beyond the agreed-upon completion date. The contract requirements are similar to contracts that Marigold has performed previously and management believes that such experience is predictive for this contract. Management estimates that there is a 50% probability that the contract will be completed by the agreed-upon completion date, a 30% probability that it will be completed 1 week late, and a 20% probability that it will be completed 2 weeks late. What is the total transaction price for this revenue arrangement? O $462620 O $483260 O $489452 $503900

HW #10 (continued) JK7 [7 pts] For the satellite contract described in the in-class exercise, the build plan and spending profile is shown below. - The contract calls for the following payment profile from the customer • Payments = 80% of company expenditures in each year, with an additional milestone payment of $100M in the year that each satellite is completed • Create a spreadsheet to model the full 10-year program and use it to (a) annual cash flow (b) IRR for the full 7-satellite, 10-year program 1 2 3 4 5 6 7 8 9 10 S1 10% 30% 40% 20% S2 30% 50% 20% S3 30% 50% 20% S4 30% 50% 20% S5 30% 50% 20% S6 30% 50% 20% S7 30% 50% 20%

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Answer 2

Question

Chapter 5, Problem 5.5P

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.

Variable consideration:

Variable consideration refers to the uncertain transaction price that depends upon the outcome of future events.

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 prepare: The journal entry on January 31 to record the collection of cash and recognition of the first month’s revenue.

Requirement – 2

To determine

To prepare: The journal entry on June 30 to record receipt of the bonus, and assume total cost saving exceed target.

Requirement – 3

To determine

To prepare: The journal entry on June 30 to record payment of the penalty.

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Answer 3

Question

Chapter 5, Problem 5.5P

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.

Variable consideration:

Variable consideration refers to the uncertain transaction price that depends upon the outcome of future events.

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 prepare: The journal entry on January 31 to record the collection of cash and recognition of the first month’s revenue.

Requirement – 2

To determine

To prepare: The journal entry on June 30 to record receipt of the bonus, and assume total cost saving exceed target.

Requirement – 3

To determine

To prepare: The journal entry on June 30 to record payment of the penalty.

Expert Solution & Answer

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Answer 4

Question

Chapter 5, Problem 5.5P

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.

Variable consideration:

Variable consideration refers to the uncertain transaction price that depends upon the outcome of future events.

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 prepare: The journal entry on January 31 to record the collection of cash and recognition of the first month’s revenue.

Requirement – 2

To determine

To prepare: The journal entry on June 30 to record receipt of the bonus, and assume total cost saving exceed target.

Requirement – 3

To determine

To prepare: The journal entry on June 30 to record payment of the penalty.

Expert Solution & Answer

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Answer 5

Chapter 5, Problem 5.5P

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.

Variable consideration:

Variable consideration refers to the uncertain transaction price that depends upon the outcome of future events.

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 prepare: The journal entry on January 31 to record the collection of cash and recognition of the first month’s revenue.

Requirement – 2

To determine

To prepare: The journal entry on June 30 to record receipt of the bonus, and assume total cost saving exceed target.

Requirement – 3

To determine

To prepare: The journal entry on June 30 to record payment of the penalty.

Answer 6

Chapter 5, Problem 5.5P

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.

Variable consideration:

Variable consideration refers to the uncertain transaction price that depends upon the outcome of future events.

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 prepare: The journal entry on January 31 to record the collection of cash and recognition of the first month’s revenue.

Answer 7

Chapter 5, Problem 5.5P

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.

Variable consideration:

Variable consideration refers to the uncertain transaction price that depends upon the outcome of future events.

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 prepare: The journal entry on January 31 to record the collection of cash and recognition of the first month’s revenue.

Answer 8

Requirement – 2

To determine

To prepare: The journal entry on June 30 to record receipt of the bonus, and assume total cost saving exceed target.

Answer 9

Requirement – 2

To determine

To prepare: The journal entry on June 30 to record receipt of the bonus, and assume total cost saving exceed target.

Answer 10

Requirement – 3

To determine

To prepare: The journal entry on June 30 to record payment of the penalty.

Answer 11

Requirement – 3

To determine

To prepare: The journal entry on June 30 to record payment of the penalty.

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 - How might the definition of probable affect...Ch. 5 - When a contract includes an option to buy...Ch. 5 - Prob. 5.10Q

Solution Summary: The author explains the rules of debiting and crediting different accounts while they occur in business transactions.

To prepare: The journal entry on June 30 to record receipt of the bonus, and assume total cost saving exceed target.

To prepare: The journal entry on June 30 to record payment of the penalty.

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Chapter 5 Solutions