Due to the nature of the specific industry, Deer and Co. is paid (i.e., Deer and Co.
Question:
Due to the nature of the specific industry, Deer and Co. is paid (i.e., Deer and Co. receives cash) by theircustomers in advance of Deer and Co. actually performing the services. Deer and Co. recognizes revenue from these services over the service period. Assume that all such service sales work this way and that these service sales are the only ones that are paid for in advance.
An alternative treatment (which is not allowed under GAAP) for the service revenues would be to record revenue at the time at which cash is received. No further entry would then be needed when the services are provided.
To keep the analysis simple, assume that differences in the timing of revenue recognition do NOT affect the timing of expense recognition (alternatively, assume that the direct costs of providing the services are negligible). Ignore taxes.
Questions
1. If Deer and Co. had always used the alternative treatment to account for Mining Services revenues, what would have been their Total sales and revenues for the year ended December 31, 2021? __________
2. If Deer and Co. had always used the alternative treatment to account for Mining Services revenues, what would have been their debt-assets ratio (defined as total liabilities divided by total assets) as of December 31, 2021? Express your answer to two decimal places (i.e., 12.34% rather than 12%). __________
BS
SE
IS
Auditing and Assurance services an integrated approach
ISBN: 978-0132575959
14th Edition
Authors: Alvin a. arens, Randal j. elder, Mark s. Beasley