Financial Accounting Standards Board (FASB): FASB is an independent 7 member board, of accounting professionals overseeing the creation of financial statement. FASB standards are generally known as GAAP. Variable consideration: Variable consideration refers to the uncertain transaction price that depends upon the outcome of future events. Transaction price: Transaction price refers to the price that is paid at the time of delivery or after delivery of goods and/or services. Specific situations affecting the transaction price are as follows: Variable amount of consideration and the restriction on its recognition. Rights for sales return Whether the seller is acting as a principle or an agent Time value of money Payments by the seller to the customer. 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 discuss: The accounting for variable consideration arising from sales-based royalties on licenses of intellectual property, and when T can recognize the revenue for sales.

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Answer 1

Question

Chapter 5, Problem 5.9P

Requirement – 1

To determine

Financial Accounting Standards Board (FASB):

FASB is an independent 7 member board, of accounting professionals overseeing the creation of financial statement. FASB standards are generally known as GAAP.

Variable consideration:

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

Transaction price:

Transaction price refers to the price that is paid at the time of delivery or after delivery of goods and/or services. Specific situations affecting the transaction price are as follows:

Variable amount of consideration and the restriction on its recognition.

Rights for sales return

Whether the seller is acting as a principle or an agent

Time value of money

Payments by the seller to the customer.

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 discuss: The accounting for variable consideration arising from sales-based royalties on licenses of intellectual property, and when T can recognize the revenue for sales.

Requirement – 2

To determine

To prepare: The journal entry to record revenue from license.

Requirement – 3

To determine

To prepare: The journal entry to record revenue recognized on December 31, 2016.

Requirement – 4

To determine

To prepare: The journal entry to record deferred revenue on April, 1 and December 31, 2016.

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1. I want to know how to solve these 2 questions and what the answers are 3. Field & Co. expects its EBIT to be $125,000 every year forever. The firm can borrow at 7%. The company currently has no debt, and its cost of equity is 12%. If the tax rate is 24%, what is the value of the firm? What will the value be if the company borrows $205,000 and uses the proceeds to purchase shares? 2. Firms HD and LD each have $30m in invested capital, $8m of EBIT, and a tax rate of 25%. Firm HD has a D/E ratio of 50% with an interest rate of 8% on their debt. Firm LD has a debt-to-capital ratio of 30%, however, pays 9% interest on its debt. Calculate the following: a. Return on invested capital for firm LDb. Return on equity for each firmc. If HD’s CFO is thinking of lowering the D/E from 50% to 40%, which will lower their interest rate further from 8% to 7%, calculate the new ROE for firm HD.

Answer 2

Question

Chapter 5, Problem 5.9P

Requirement – 1

To determine

Financial Accounting Standards Board (FASB):

FASB is an independent 7 member board, of accounting professionals overseeing the creation of financial statement. FASB standards are generally known as GAAP.

Variable consideration:

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

Transaction price:

Transaction price refers to the price that is paid at the time of delivery or after delivery of goods and/or services. Specific situations affecting the transaction price are as follows:

Variable amount of consideration and the restriction on its recognition.

Rights for sales return

Whether the seller is acting as a principle or an agent

Time value of money

Payments by the seller to the customer.

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 discuss: The accounting for variable consideration arising from sales-based royalties on licenses of intellectual property, and when T can recognize the revenue for sales.

Requirement – 2

To determine

To prepare: The journal entry to record revenue from license.

Requirement – 3

To determine

To prepare: The journal entry to record revenue recognized on December 31, 2016.

Requirement – 4

To determine

To prepare: The journal entry to record deferred revenue on April, 1 and December 31, 2016.

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Answer 3

Question

Chapter 5, Problem 5.9P

Requirement – 1

To determine

Financial Accounting Standards Board (FASB):

FASB is an independent 7 member board, of accounting professionals overseeing the creation of financial statement. FASB standards are generally known as GAAP.

Variable consideration:

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

Transaction price:

Transaction price refers to the price that is paid at the time of delivery or after delivery of goods and/or services. Specific situations affecting the transaction price are as follows:

Variable amount of consideration and the restriction on its recognition.

Rights for sales return

Whether the seller is acting as a principle or an agent

Time value of money

Payments by the seller to the customer.

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 discuss: The accounting for variable consideration arising from sales-based royalties on licenses of intellectual property, and when T can recognize the revenue for sales.

Requirement – 2

To determine

To prepare: The journal entry to record revenue from license.

Requirement – 3

To determine

To prepare: The journal entry to record revenue recognized on December 31, 2016.

Requirement – 4

To determine

To prepare: The journal entry to record deferred revenue on April, 1 and December 31, 2016.

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Answer 4

Question

Chapter 5, Problem 5.9P

Requirement – 1

To determine

Financial Accounting Standards Board (FASB):

FASB is an independent 7 member board, of accounting professionals overseeing the creation of financial statement. FASB standards are generally known as GAAP.

Variable consideration:

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

Transaction price:

Transaction price refers to the price that is paid at the time of delivery or after delivery of goods and/or services. Specific situations affecting the transaction price are as follows:

Variable amount of consideration and the restriction on its recognition.

Rights for sales return

Whether the seller is acting as a principle or an agent

Time value of money

Payments by the seller to the customer.

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 discuss: The accounting for variable consideration arising from sales-based royalties on licenses of intellectual property, and when T can recognize the revenue for sales.

Requirement – 2

To determine

To prepare: The journal entry to record revenue from license.

Requirement – 3

To determine

To prepare: The journal entry to record revenue recognized on December 31, 2016.

Requirement – 4

To determine

To prepare: The journal entry to record deferred revenue on April, 1 and December 31, 2016.

Expert Solution & Answer

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Answer 5

Chapter 5, Problem 5.9P

Requirement – 1

To determine

Financial Accounting Standards Board (FASB):

FASB is an independent 7 member board, of accounting professionals overseeing the creation of financial statement. FASB standards are generally known as GAAP.

Variable consideration:

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

Transaction price:

Transaction price refers to the price that is paid at the time of delivery or after delivery of goods and/or services. Specific situations affecting the transaction price are as follows:

Variable amount of consideration and the restriction on its recognition.

Rights for sales return

Whether the seller is acting as a principle or an agent

Time value of money

Payments by the seller to the customer.

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 discuss: The accounting for variable consideration arising from sales-based royalties on licenses of intellectual property, and when T can recognize the revenue for sales.

Requirement – 2

To determine

To prepare: The journal entry to record revenue from license.

Requirement – 3

To determine

To prepare: The journal entry to record revenue recognized on December 31, 2016.

Requirement – 4

To determine

To prepare: The journal entry to record deferred revenue on April, 1 and December 31, 2016.

Answer 6

Chapter 5, Problem 5.9P

Requirement – 1

To determine

Financial Accounting Standards Board (FASB):

FASB is an independent 7 member board, of accounting professionals overseeing the creation of financial statement. FASB standards are generally known as GAAP.

Variable consideration:

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

Transaction price:

Transaction price refers to the price that is paid at the time of delivery or after delivery of goods and/or services. Specific situations affecting the transaction price are as follows:

Variable amount of consideration and the restriction on its recognition.

Rights for sales return

Whether the seller is acting as a principle or an agent

Time value of money

Payments by the seller to the customer.

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 discuss: The accounting for variable consideration arising from sales-based royalties on licenses of intellectual property, and when T can recognize the revenue for sales.

Answer 7

Chapter 5, Problem 5.9P

Requirement – 1

To determine

Financial Accounting Standards Board (FASB):

FASB is an independent 7 member board, of accounting professionals overseeing the creation of financial statement. FASB standards are generally known as GAAP.

Variable consideration:

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

Transaction price:

Transaction price refers to the price that is paid at the time of delivery or after delivery of goods and/or services. Specific situations affecting the transaction price are as follows:

Variable amount of consideration and the restriction on its recognition.

Rights for sales return

Whether the seller is acting as a principle or an agent

Time value of money

Payments by the seller to the customer.

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 discuss: The accounting for variable consideration arising from sales-based royalties on licenses of intellectual property, and when T can recognize the revenue for sales.

Answer 8

Requirement – 2

To determine

To prepare: The journal entry to record revenue from license.

Answer 9

Requirement – 2

To determine

To prepare: The journal entry to record revenue from license.

Answer 10

Requirement – 3

To determine

To prepare: The journal entry to record revenue recognized on December 31, 2016.

Answer 11

Requirement – 3

To determine

To prepare: The journal entry to record revenue recognized on December 31, 2016.

Answer 12

Requirement – 4

To determine

To prepare: The journal entry to record deferred revenue on April, 1 and December 31, 2016.

Answer 13

Requirement – 4

To determine

To prepare: The journal entry to record deferred revenue on April, 1 and December 31, 2016.

Answer 14

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Answer 15

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Answer 16

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Answer 17

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

To prepare: The journal entry to record revenue from license.

To prepare: The journal entry to record revenue recognized on December 31, 2016.

To prepare: The journal entry to record deferred revenue on April, 1 and December 31, 2016.

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Chapter 5 Solutions