Question

Ten Peaks Coffee Company Inc. is a Burnaby, British Columbia–based specialty coffee company. The company provides green coffee decaffeination services as well as green coffee handling and storage services. Exhibits 4-15A and B contain excerpts from Ten Peaks’ 2013 annual report.
EXHIBIT 4-15B EXCERPT FROM TEN PEAKS COFFEE COMPANY INC.’S 2013 ANNUAL REPORT
3.13 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.
Revenue is recognized when all the following conditions are satisfed:
1) a persuasive evidence of arrangement exists;
2) the goods are shipped;
3) title has passed to the customer;
4) the price has been substantively determined; and
5) collection is reasonably assured.
Required:
a. Calculate Ten Peaks’ gross profit percentage for 2013 and 2012. Has it improved?
b. Does Ten Peaks prepare its consolidated income statement using a single-step or a multi-step approach?
c. Does Ten Peaks present its expenses by function or by nature? Does this approach require a higher level of management judgement when preparing the statement?
d. Is the revenue reported on Ten Peaks’ statements of income and comprehensive income net of estimated customer returns, rebates, and allowances?
e. Compare the five conditions for revenue recognition identified by Ten Peaks with the five revenue recognition criteria outlined in Exhibit 4-2. Are they consistent? Are there any significant differences?


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  • CreatedJune 11, 2015
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