Click Link Below To Buy: http://hwaid.com/shop/acct-311-final-exam/ 1. XYZ Company sells appliance service contracts agreeing to repair appliances for a two-year period. XYZ’s past experience is that, of the total dollars spent for repairs on service contracts, 40% is incurred evenly during the first contract year and 60% evenly during the second contract year. Receipts from service contract sales for the two years ended December 31, year 2, are as follows: Year 1 $500,000
Year 2 $600,000 Receipts from contracts are credited to unearned service contract revenue. Assume that all contract sales are made evenly during the year. What amount should XYZ report as unearned service contract revenue at December 31, …show more content…
A company sells inventory costing $15,000 to a customer for $20,000. Because of significant uncertainties surrounding the transaction, the installment sales method is viewed as proper. In the first year, the company collects $5,700. In the second year, the company collects another $8,000. What amount of profit should the company recognize in the second year?
4. $5,000 12. A company sends 10,000 units of its products to one of its customers on December 28, Year One. The customer has a right to return any of this merchandise within 6 months for a full refund. The company wants to record this transaction as a sale in Year One. Which of the following is most likely to necessitate that the recording of the transaction as a sale be delayed until Year Two?
1. The company can make a reasonable estimation that 25 percent of the units will be returned.
2. Return of the goods is not contingent on resale.
3. If the goods are stolen from the customer, the obligation is not affected.
4. The company cannot make a reasonable estimation of the number of units that will be returned. 13. In a statement of cash flows, if used equipment is sold at a gain, the amount shown as a cash inflow from investing activities equals the carrying amount of the …show more content…
The Blacksville Company reports sales of $500,000 in Year One, its first year in operations. Sales increased to $600,000 in Year Two and $700,000 in Year Three. The company had total reported expenses of $280,000 in Year One, $370,000 in Year Two, and $460,000 in Year Three. This company has consistently been applying the Red Method, which recognizes one particular expense as always being equal to 10 percent of sales. Assume, though, that at the very end of Year Three, company officials decide to change to the Purple Method. This method is also accepted by US GAAP but computes this same expense as simply being $62,000 each year. Blacksville is now preparing to present income statements for only Years Two and Three. After making the change, what is the beginning retained earnings reported for Year Three? Ignore income taxes. Assume no dividends are