Access the Wiki Art Gallery WAG instructional case in Connect
Access the Wiki Art Gallery (WAG) instructional case in Connect and read the case in sufficient depth to answer the following questions.
1. Is the revenue recognition policy used by WAG for artwork sales in accordance with the revenue recognition principle? Why or why not?
a. Yes, the artwork sales policy is in accordance with the revenue recognition principle because WAG reports sales using FOB shipping point.
b. Yes, the artwork sales policy is in accordance with the revenue recognition principle because WAG reports sales using FOB destination.
c. No, the artwork sales policy is not in accordance with the revenue recognition principle because WAG reports revenue as it is earned each month.
d. No, the artwork sales policy is not in accordance with the revenue recognition principle because WAG reports revenue before it fulfills its obligation to transfer ownership of the artwork to the customer.
2. WAG presents a single-step income statement. Reorganize it into a multistep format to calculate the gross profit from artwork sales in 2011 and 2010 and the gross profit percentage from artwork sales in 2011 and 2010. Which of the following is consistent with the amounts reported by WAG?
a. Gross profit from artwork sales was \$ 58,225 in 2011 and \$ 10,400 in 2010, and the gross profit percentage was 72.2% in 2011 and 34.2% in 2010.
b. Gross profit from artwork sales was \$ 58,225 in 2011 and \$ 10,400 in 2010, and the gross profit percentage was 41.6% in 2011 and 14.9% in 2010.
c. Gross profit from artwork sales was \$ 63,061 in 2011 and \$ 2,417 in 2010, and the gross profit percentage was 45.0% in 2011 and 3.45% in 2010.
d. Gross profit from artwork sales was \$ 22,375 in 2011 and \$ 20,000 in 2010, and the gross profit percentage was 27.8% in 2011 and 65.8% in 2010.
3. Recalculate WAG’s gross profit and gross percentage for 2011 after removing the effects of the sale to TEAC. Which of the following is consistent with these revised amounts?
a. The revised gross profit would be \$ 30,600, resulting in a gross profit percentage of 38.0%.
b. The revised gross profit would be \$ 8,225, resulting in a gross profit percentage of 26.9%.
c. The revised gross profit would be \$ 10,600, resulting in a gross profit percentage of 34.6%.
d. The revised gross profit would be \$ 10,225, resulting in a gross profit percentage of 33.4%.
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