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, 2018.

Requirement – 4

To determine

To prepare: The journal entry to record deferred revenue on April, 1 and December 31, 2018.

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Cullumber Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2025, Job 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $16,800, direct labor $10,080, and manufacturing overhead $13,440. As of January 1, Job 49 had been completed at a cost of $75,600 and was part of finished goods inventory. There was a $12,600 balance in the Raw Materials Inventory account on January 1. During the month of January, Cullumber Company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were sold on account during the month for $102,480 and $132,720, respectively. The following additional events occurred during the month. 1. Purchased additional raw materials of $75,600 on account. 2. Incurred factory labor costs of $58,800. 3. Incurred manufacturing overhead costs as follows: depreciation expense on equipment $10,080; and various other…

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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, 2018.

Requirement – 4

To determine

To prepare: The journal entry to record deferred revenue on April, 1 and December 31, 2018.

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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, 2018.

Requirement – 4

To determine

To prepare: The journal entry to record deferred revenue on April, 1 and December 31, 2018.

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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, 2018.

Requirement – 4

To determine

To prepare: The journal entry to record deferred revenue on April, 1 and December 31, 2018.

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, 2018.

Requirement – 4

To determine

To prepare: The journal entry to record deferred revenue on April, 1 and December 31, 2018.

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, 2018.

Answer 11

Requirement – 3

To determine

To prepare: The journal entry to record revenue recognized on December 31, 2018.

Answer 12

Requirement – 4

To determine

To prepare: The journal entry to record deferred revenue on April, 1 and December 31, 2018.

Answer 13

Requirement – 4

To determine

To prepare: The journal entry to record deferred revenue on April, 1 and December 31, 2018.

Answer 14

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Answer 15

Expert Solution & Answer

Answer 16

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Answer 17

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

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

To prepare: The journal entry to record revenue recognized on December 31, 2018.

To prepare: The journal entry to record deferred revenue on April, 1 and December 31, 2018.

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Chapter 5 Solutions