A gym's sales of annual memberships for $40,000 have been included in membership fees revenue. 1. A

A gym's sales of annual memberships for $40,000 have been included in membership fees revenue.

Transcribed Image Text:

1. A gym's sales of annual memberships for $40,000 have been included in Membership fees revenue. This amount was received on July 1, 2020 for memberships which are valid from July 1, 2020 to June 30, 2021. Examine whether it is appropriate to include the entire $40,000 in revenues for the year ended December 31, 2020. If it is appropriate, provide justification. If it is not appropriate, explain why and prepare the required journal entry to adjust the accounts. 2. Wellefson Equipment Company sells computers for $2,000 each and also gives each customer a 1-year warranty that requires the company to perform periodic services and to replace defective parts. During 2020, the company sold for cash 500 computers that had a cost of $700 each. Based on past experience, the company has estimated warranties to be 3% of sales. During 2020, the Company reimbursed customers for 10 defective computers, which were returned to the manufacturer. Record the journal entries to reflect the above transactions (accrual method) for 2024. Assume sales are on a cash basis and that a perpetual inventory system is used. 1. A gym's sales of annual memberships for $40,000 have been included in Membership fees revenue. This amount was received on July 1, 2020 for memberships which are valid from July 1, 2020 to June 30, 2021. Examine whether it is appropriate to include the entire $40,000 in revenues for the year ended December 31, 2020. If it is appropriate, provide justification. If it is not appropriate, explain why and prepare the required journal entry to adjust the accounts. 2. Wellefson Equipment Company sells computers for $2,000 each and also gives each customer a 1-year warranty that requires the company to perform periodic services and to replace defective parts. During 2020, the company sold for cash 500 computers that had a cost of $700 each. Based on past experience, the company has estimated warranties to be 3% of sales. During 2020, the Company reimbursed customers for 10 defective computers, which were returned to the manufacturer. Record the journal entries to reflect the above transactions (accrual method) for 2024. Assume sales are on a cash basis and that a perpetual inventory system is used.

Answer rating: 100% (QA)

1 It is not appropriate to include the entire Revenue 40000 in the financial year ended 31D... View the full answer