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intermediate accounting reporting

Questions and Answers of Intermediate Accounting Reporting

Contract Identification On October 1, 2019, Graham’s Weed&Feed Inc. signs a contract to maintain the grounds for BigData Corp. The contract ends on March 31, 2020, and has a monthly payment of
Blackmon Company provides locator services to the city transportation departments. Blackmon’s service involves installing a dedicated hardware transmitter in each city bus. This transmitter
Jorg is building an office building for Wilmington Company for $20,000,000. The contract has the following characteristics:• The office building is built to the customer’s specifications and the
Escargot Inc. is a 5-star restaurant in Cincinnati. The restaurant sells 500 gift cards during January 2019. Each gift card has a face value of $300. The gift cards never expire, although based on
Fender Construction Company receives a contract to construct a building over a period of 3 years for a price of $700,000. The contract represents a single performance obligation that will be
In 2019, Dreyer Corp. began construction work under a 3-year contract, which represents a single performance obligation. The contract price is $800,000, and the performance obligation is satisfied
Palantir Corp. sells specialized equipment to the healthcare industry. Palantir pays its sales agents a salary plus a 5% commission on sales. Sales agents employed by the company sold 10 Osgilith MRI
January 2, 2019, TI enters into a contract with Drewry Corp. to build a new piece of equipment. The contract price is $3 million, and construction is expected to take 18 months. Drewry is billed and
On January 1, 2019, ForeRunner Inc. enters into a contract with a sporting goods company to provide 100 GPS-enabled watches for $25,000 ($250 per watch) over the next 6 months. On April 1, 2019, when
JustKitchens Inc. provides services to restaurants and hotels. The company supplies paper products, tableware, cookware, restaurant and kitchen equipment, and cleaning supplies. On January 2, 2019,
Each of the following independent situations relates to the recognition of revenue:a. On June 2, 2019, a customer books travel on an airline, paying $500 for a round-trip ticket that departs July 15,
Newberg Construction Corp. contracted to construct a building for $400,000. Construction began in 2019 and was completed in 2020. Data relating to the contract are as follows:Newberg determined that
Koolman Construction Company began work on a contract in 2019. The contract price is $3,000,000, and the company determined that its performance obligation was satisfied over time. Other information
King Construction Company began work on a contract in 2019. The contract price is $4,000,000, and King determined that its performance obligation was satisfied over time. Other information relating
In 2019, Tarlo Company agrees to construct a highway for Brice County over a 3-year period (2019 through 2021). The contract price is $1,200,000, and the construction costs (both actual and
Assume the same facts as in E17-19, except that Rix cannot directly observe the stand-alone selling prices of the installation and service contracts. However, Rix has determined that the cost of the
Rix Company sells home appliances and provides installation and service for its customers. On April 1, 2019, a customer purchased a dishwasher that Rix normally sells for $1,000. In addition, the
On December 1, 2019, AwakeAllNight Inc. sells 5,000 super caffeinated candy bars to Campus Grocers. The candy bars sell for $3 per bar. In addition, AwakeAllNight pays Campus Grocers a $900
On February 1, 2019, Silicon Rentals contracts with Zurgg Technology to provide 6 months of office services in exchange for 18,000 shares of Zurgg’s common stock. The contract is signed on that
On January 1, 2019, Fulton Inc. enters into a contract with Gibson to deliver goods. Gibson pays $100,000 at the time the contract is signed, at which time the goods are transferred and Fulton’s
On January 1, 2019, Piper Company entered into an agreement with Save-Mart to sell its most popular product, the gadget. The contract stipulates that the price per unit will decrease as Save-Mart
On January 5, 2019, ShoeKing Corp. sells for cash 500 pairs of volleyball shoes to FootAction, a shoe retailer, for $70 each. FootAction has the right to return the shoes for any reason up to March
On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for $7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract
On January 1, 2019, Crockett Pharmaceuticals granted a 5-year license of its patent rights to a drug compound to Tubbs Company for $10 million. As part of the agreement, Crockett also agrees to
WaterWorld Inc. operates an aquarium and water park in Orlando, Florida. In addition to daily admission tickets, WaterWorld offers two other ticket options. First, it offers an annual pass for $600
GrillMaster Inc. sells an industry-leading line of outdoor charcoal and gas grills to customers through its online store as well as national home improvement stores. While the majority of the
Assume the same facts as in E17-5 and ignore E17-6. On July 1, 2019, the customer realizes that she needs a text messaging plan and adds an unlimited text messaging plan for the remaining term of the
Assume the same facts as in E17-5. On July 1, 2019, the customer realizes that she needs less data in her wireless plan and downgrades to the unlimited talk and 2 GB data plan for the remaining term
On January 1, 2019, Loud Company enters into a 2-year contract with a customer for an unlimited talk and 5 GB data wireless plan for $65 per month. The contract includes a smartphone for which the
On January 1, 2019, Spring Fashions Inc. enters into a contract with a southeast retail company to provide 500 dresses for $62,500 ($125 per dress) over the next 10 months. On October 1, 2019, after
On August 1, 2019, Aiken Corp. enters into a contract with Benton Corp. to sell it $25,000 of goods. Aiken will deliver the goods on August 30, 2019, and Benton will pay the full amount upon
Consider each of the following scenarios:a. A seller orally agrees with one of its best customers to deliver goods in exchange for $10,000. While the seller’s practice is to obtain a written sales
Company enters into a contract with Dearborn Inc. to sell it $50,000 of goods with delivery on May 10, 2019. Cass manufactured the goods at a cost of $33,000. The contract is signed on April 15,
LongDrive sells a specialized golf club that has core plugs to shift weight in the club head and produce different ball flights. LongDrive sells the golf club and replacement core plugs separately,
On April 1, 2019, Pine Construction Company entered into a fixed-price contract to construct an apartment building for $6,000,000. Pine will satisfy the performance obligations in the contract over
Warren Construction Company has consistently recognized revenue from its long-term contracts as the performance obligations were met over time. In 2019, Warren started work on a $6,000,000
On July 15, 2019, Matrix Corp. sells 20,000 snow shovels to a distributor for $15 per shovel. The distributor pays the amount on July 15, 2019, and has the right to return any of the snow shovels for
Orange Construction Company enters into a long-term contract to build a new stadium. The contract is for $400 million and work is expected to be completed on June 30, 2019. Orange will receive a $20
Under what circumstances does a company recognize revenue over time for long term contracts?
What types of disclosures must companies make to allow users to understand how revenue is by affected economic factors?
If the seller’s performance creates an asset (e.g., work in progress) that the customer controls as the asset is created, would the performance obligation be satisfied at a point in time or over
How does a seller satisfy a performance obligation? When does this occur?
What is the best evidence of a good’s or service’s stand-alone selling price?
How does the seller allocate the transaction price when a contract contains multiple performance obligations?
What is the seller’s main objective when determining the transaction price?
How should the seller treat promised goods and services that are not distinct within a contract?
What is a performance obligation? Do performance obligations need to be legally enforceable?
What is a contract? What form can a contract take?
When a company recognizes revenue during a period, what does it also recognize in its balance sheet?
How does the FASB define revenues?
SituationIn 2019, its first year of operations, Kanbec Corporation appropriately reported basic earnings per share of $1.05 on its income statement. During 2020, the company instituted a share option
Ryan Company has as a goal that its earnings per share should increase by at least 3% each year; this goal has been attained every year over the past decade. As a result, the market price per share
Obtain The Coca-Cola Company’s 2017 annual report either using the “Investor Relations” portion of its web site (do a Web search for Coca-Cola investor relations) or go to http://www.sec.gov
Brady Company has 30,000 shares of $10 par value common stock authorized and 20,000 shares issued and outstanding. On August 13, 2019, Brady purchased 1,000 shares of treasury stock for $12 per
Olmstead Corporation’s capital structure is as follows:The following additional information is available:1. On September 1, 2019, Olmstead sold 36,000 additional shares of common stock.2. Net
The controller of Red Lake Corporation has requested assistance in determining income, basic earnings per share, and diluted earnings per share for presentation on the company’s income statement
Frost Company has accumulated the following information relevant to its 2019 earnings per share.1. Net income for 2019: $150,500.2. Bonds payable: On January 1, 2019, the company had issued 10%,
At the beginning of 2019, Microbee Honey Corporation had 90,000 shares of $1.00 par value common stock issued and outstanding. During 2019, the following common stock transactions have taken
Roseau Company is preparing its annual earnings per share amounts to be disclosed on its 2019 income statement. It has collected the following information at the end of 2019:1. Net income: $120,400.
Winona Company began 2019 with 10,000 shares of $10 par common stock and 2,000 shares of 9.4%, $100 par, convertible preferred stock outstanding. On April 2 and June 1, respectively, the company
Waseca Company had 5 convertible securities outstanding during all of 2019. It paid the appropriate interest (and amortized any related premium or discount using the straight-line method) and
Anoka Company reported the following selected items in the shareholders’ equity section of its balance sheet on December 31, 2019, and 2020:In addition, it listed the following selected pretax
Mantego Company listed the following selected pretax items as of December 31, 2019:Additional information:The preferred shares had been outstanding the entire year; annual dividends were declared and
Graham Railways Inc. is evaluating its operations and provides the following information:Required:For each of the years 2017 through 2019, calculate Graham Railways’s earnings per share and
Cory Company’s shareholders’ equity on January 1, 2019, is as follows:Preferred stock, 8%, $100 par, callable at $116 ....................................$100,000Preferred stock, 7%, $100 par
Included in the December 31, 2018, Jacobi Company balance sheet was the following shareholders’ equity section:The company engaged in the following stock transactions during 2019:Jan. 4 Paid the
Gray Company lists the following shareholders’ equity items on its December 31, 2018, balance sheet:The following stock transactions occurred during 2019:Jan. 4 Issued 3,000 shares of common stock
Truman Co. is a publicly held company whose shares are traded in the over-the-counter market. The shareholders’ equity at December 31, 2018, is comprised of the following:Transactions during 2019
Oakwood Inc. is a public enterprise whose shares are traded in the over-the-counter market. At December 31, 2018, Oakwood had 6,000,000 authorized shares of $10 par value common stock, of which
Isanti Inc. finances its capital needs approximately one-third from long-term debt and two-thirds from equity. At December 31, 2018, Isanti had the following liability and equity items:11% debenture
The shareholders’ equity section of Gaines Industries’s balance sheet appeared as follows at December 31, 2018:During 2019, the following chronological transactions were recorded:1. Gaines
Raun Company had the following equity items as of December 31, 2019:Preferred stock, 9% cumulative, $100 par, convertiblePaid-in capital in excess of par value on preferred stockCommon stock, $1
Dana Company reported the following amounts in the shareholders’ equity section of itsDecember 31, 2018, balance sheet:During 2019, Dana’s net income was $83,000 and its dividends on preferred
Dakota Corporation had the following shareholders’ equity account balances at December 31, 2018:Preferred stock
You’ve been hired to perform an audit of Hubbard Company for the year ended December 31, 2019. You find the following account balances related to shareholders’ equity:Preferred stock, $100 par $
On January 1, 2019, Kittson Company had a retained earnings balance of $218,600. It is subject to a 30% corporate income tax rate. During 2019, Kittson earned net income of $67,000, and the following
Otter Tail, Inc., began operations in January 2015 and had the following reported net income or loss for each of its 5 years of operations:At December 31, 2019, Otter Tail’s capital stock was
Francis Company has 20,000 shares of common stock outstanding during all of 2019. It also has two convertible securities outstanding at the end of 2019. These are:1. Convertible preferred stock:
Percy Company has 15,000 shares of common stock outstanding during all of 2019. It also has 2 convertible securities outstanding at the end of 2019. These are:1. Convertible preferred stock: 1,000
Tama Company’s capital structure consists of common stock and convertible bonds. At the beginning of 2019, Tama had 15,000 shares of common stock outstanding; an additional 4,500 shares were
Dream Corporation reported net income of $44,000 for 2019. The company has 10,000 shares of common stock issued and outstanding for all of 2019 and no preferred stock. During 2018, Dream issued
Palo Alto Company earned net income of $43,800 during 2019. At the beginning of 2019, it had 10,000 shares of common stock outstanding; an additional 4,000 shares were issued on July 2. During 2019,
At the beginning of 2019, Hardin Company had 220,000 shares of $10 par common stock outstanding. During the year, it engaged in the following transactions related to its common stock:Mar. 1 Issued
The shareholders’ equity section of Flores Design Company’s December 31, 2018, balance sheet appeared as follows:Contributed Capital:Preferred stock, $100 par (10,000 shares authorized, 1,250
Herrera Manufacturing Corporation completed the following transactions during its firstyear of operation, 2019:1. The state authorized the issuance of 30,000 shares of $5 par common stock; 15,000
On January 1, 2019, Castillo Company had a retained earnings balance of $206,000. During the year, the following events occurred:1. Treasury stock (common) was acquired at a cost of $14,000. State
Rolt Company began 2019 with a $120,000 balance in retained earnings. During the year, the following events occurred:1. The company earned net income of $80,000.2. A material error in net income from
Pemberton Company has a retained earnings balance of $400,000 at the end of 2019. During 2019, it had issued $100,000 of 5-year, 12%, long-term bonds. The bond provisions require that each year over
Scobie Company began 2019 with a retained earnings balance of $142,400. During an examination of its accounting records on December 31, 2019, Scobie found it had made the following material errors,
Stamboul Company lists the following condensed balance sheet as of the beginning of 2019:Current assets ..................................................$ 60,000Investment in Ostend bonds
Carlyon Company listed the following items in its December 31, 2018, financial statements:Investment in Man Company bonds .........................$ 25,000Dividends payable: preferred
At December 31, 2019, Talbot Corporation had 90,000 shares of common stock and 20,000 shares of convertible preferred stock outstanding, in addition to 9% convertible bonds payable in the face
Iredell Company has 2,500,000 shares of common stock outstanding on December 31, 2018. An additional 500,000 shares of common stock were issued on April 2, 2019, and 250,000 more on July 2, 2019.
Hyde Corporation’s capital structure at December 31, 2018, was as follows:................................................Shares Issued and OutstandingCommon stock
Kent Corporation was organized on January 1, 2014. On that date, it issued 200,000 shares of $10 par value common stock at $15 per share (400,000 shares were authorized). During the period January
Prince Corporation’s accounts provided the following information at December 31, 2019:Total income since incorporation ..........................$840,000Total cash dividends paid
Cash dividends on the $10 par value common stock of Garrett Company were as follows:1st quarter of 2019.................... $ 800,0002nd quarter of 2019 ......................900,0003rd quarter of
Hoke Company suffers a large loss of one of its major manufacturing facilities due to a fire. Management believes that this loss is both unusual and infrequent and estimates the per share effect of
Russell International, a publicly traded company, reacquired 500,000 shares of its common stock during July 2019 at a cost of $25 per share. The current market price of the stock was $20 per share
On November 6, 2018, Gunpowder Corp.’s board of directors approved a share option plan for key executives. On January 2, 2019, a specific number of share options were granted. These options were

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