Consider the following independent situations. Prepare responses to each as indicated.
1. Holmes Company sells goods to Watson Corp. for £22,000 on January 2, 2010, with payment due in 12 months. The fair value of the goods at the date of sale is £20,000. Prepare the journal entry to record this transaction on January 2, 2010. How much total revenue should be recognized related to this sale in 2010?
2. Golf Package Inc. (GPI) sells tickets for golfing vacations to members of local country clubs. The total 4-day golfing package, including green fees and hotel, costs customers $3,500. GPI pays the hotels and golf courses for the services provided in each package, and GPI receives a commission of 6% of the total price. GPI sold 20 of these packages. Prepare the entry to record the revenue recognized by GPI on this transaction.
3. INET Connections Inc. sells prepaid access cards for Internet cafes located across Europe. These cards are very popular with students on international study trips. For a €25 fee, a customer gets unlimited Internet access for a 7-day period. INET then pays the Internet providers the actual Internet use. Assume that INET sells €16,000 of prepaid cards in January 2010. It then pays Inter Express based on usage, which turns out to be 20% in February, 40% in March, and 40% in April. The total payment to InterExpress over the 3 months is €13,000. Indicate how much revenue INET should recognize in January, February, March, and April.

  • CreatedJune 17, 2013
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