Earlier this year, Terzetto Hot Tubs implemented a promotion where customers do not have to pay...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Earlier this year, Terzetto Hot Tubs implemented a promotion where customers do not have to pay for their purchase for three years after the date of delivery (they sign a non-interest-bearing note instead). Because people have been unable to go on vacations, sales have been brisk. The typical hot tub sells for $9,000 (the "sticker price") and customers would normally be charged 10% annual interest on any unpaid balance in their account. a. Identify what is being "sold" or briefly discuss the separate performance obligations Terzetto should be considering for its sales of hot tubs. (One sentence or point form) b. Assuming a hot tub was delivered on June 1. prepare all of the journal entries that should be recorded on this day for a typical $9,000 hot tub, assuming the customer takes advantage of the "do not pay for three years" option. Please show your calculations or calculator inputs. Assume the sticker price of $9,000 is based on a 25% mark-up on cost. Prepare all journal entries that should be recorded on December 31, 2020 regarding this note. d. The balance in Terzetto's Allowance for Doubtful Accounts was $18,000 on January 1, 2020, Prior history indicates that Terzetto collects 97% of the payments so during the year, bad debts expense of $45,900 were recorded and write-offs were $67,000. Now at the December 31, 2020 year-end, the controller estimates that due to the effect of covid on the economy, 5% of the $1,350,000 balance in receivables will probably be uncollectable, Prepare any adjusting entries that should be recorded at year-end. C. Briefly discuss (two or three sentences) why you agree or disagree with the current method of accounting used by Terzetto for bad debts. Support your answer with a reference to at least one foundational principle from the conceptual framework (excluding full disclosure) Earlier this year, Terzetto Hot Tubs implemented a promotion where customers do not have to pay for their purchase for three years after the date of delivery (they sign a non-interest-bearing note instead). Because people have been unable to go on vacations, sales have been brisk. The typical hot tub sells for $9,000 (the "sticker price") and customers would normally be charged 10% annual interest on any unpaid balance in their account. a. Identify what is being "sold" or briefly discuss the separate performance obligations Terzetto should be considering for its sales of hot tubs. (One sentence or point form) b. Assuming a hot tub was delivered on June 1. prepare all of the journal entries that should be recorded on this day for a typical $9,000 hot tub, assuming the customer takes advantage of the "do not pay for three years" option. Please show your calculations or calculator inputs. Assume the sticker price of $9,000 is based on a 25% mark-up on cost. Prepare all journal entries that should be recorded on December 31, 2020 regarding this note. d. The balance in Terzetto's Allowance for Doubtful Accounts was $18,000 on January 1, 2020, Prior history indicates that Terzetto collects 97% of the payments so during the year, bad debts expense of $45,900 were recorded and write-offs were $67,000. Now at the December 31, 2020 year-end, the controller estimates that due to the effect of covid on the economy, 5% of the $1,350,000 balance in receivables will probably be uncollectable, Prepare any adjusting entries that should be recorded at year-end. C. Briefly discuss (two or three sentences) why you agree or disagree with the current method of accounting used by Terzetto for bad debts. Support your answer with a reference to at least one foundational principle from the conceptual framework (excluding full disclosure)
Expert Answer:
Answer rating: 100% (QA)
Answer a Terzetto should be considering the separate performance obligations of the hot tub delivery and installation when selling the hot tubs b The ... View the full answer
Related Book For
Principles of Corporate Finance
ISBN: 978-0072869460
7th edition
Authors: Richard A. Brealey, Stewart C. Myers
Posted Date:
Students also viewed these accounting questions
-
One year after the date of acquisition, how is the amount of non- controlling interest on the SFP measured under the entity method and the parent-company extension method, respectively?
-
Three years after the issue of a $10,000, 6.5% coupon, 25-year bond, the rate of return required in the bond market on long-term bonds is 5.6% compounded semiannually. a. At what price would the bond...
-
Identify what is being oxidized and reduced in this redox equation. C + O2 ( CO2
-
Kim and Kanye have been dating for years and are now thinking about getting married. As a financially sophisticated couple, they want to think through the tax implications of their potential union....
-
Read up online about an interesting loyalty program and apply Figure 16-4 to identify the characteristics and give an assessment of the program's value.
-
Derive the equations for slope and deflection for the beam in Figure P7.3. Compute the maximum deflection. Hint: Maximum deflection occurs at point of zero slope. M A L B
-
A transmitter has an exponential life distribution with a failure rate of \(\alpha=0.00025\) failures per hour. (a) What is the probability that the transmitter will fail during the first 400 hours...
-
(Adjusting Entries) Bjorn Borg is the new owner of Ace Computer Services. At the end of August 2005, his first month of ownership, Bjorn is trying to prepare monthly financial statements. Below is...
-
Assume Google want to start its operations in Germany, Google is giving a sale presentation to the Government of Germany 1.How Foreign Direct Investments play roles in Google starting its operation...
-
1. Which aspect of the French revolution most disturbed commentators? 2. How would you align each of these writers on a spectrum running from extreme right to extreme left in politics? 3. How would...
-
Explain, in detail, peacemaking criminology. Explain how Quinney got to this perspective and how the context of the times helped him to develop this theory. a. What is this view more in line with? b....
-
Ben writes down the checklist of steps that his organization will perform in the event of a cryptographic malware infection. What type of response document has he created?
-
Create an email introducing and summarising the marketing budget performance report information: The purpose of this report is to analyze the marketing budget of Blue Healer Resort and Spa for the...
-
Address how and in what ways legal research and writing should glorify God. Thoughtful analysis, required citations, biblical worldview, and examples must be used throughout the thread to support the...
-
using quickbooks bill pay, what are 2 ways to fund payments to vendors? venmo, check, ACH bank transfer
-
Usually are awarded to the successful party, but are always given at the discretion of the court. Two Types of Costs: 1) Party/party costs are calculated according to Schedule C in the Rules of...
-
Hamish Carter is employed as a parking attendant at Crowne Metro Hotel. During the 2023 income year, Hamish received the following amounts: Net Wages from Crowne (PAYGW of $11,000) $59,000 Tips from...
-
A container holds 2.0 mol of gas. The total average kinetic energy of the gas molecules in the container is equal to the kinetic energy of an 8.0 10-3-kg bullet with a speed of 770 m/s. What is the...
-
Refer back to the story of Ms. Kraft in Section 3.1. a. If the one-year interest rate were 25 percent, how many plays would Ms. Kraft require to become a millionaire? b. What does the story of Ms....
-
A factory costs $400,000. You reckon that it will produce an inflow after operating costs of $100,000 in year 1, $200,000 in year 2, and $300,000 in year 3. The opportunity cost of capital is 12...
-
It has been suggested that the Fisher theory is a tautology. If the real rate of interest is defined as the difference between the nominal rate and the expected inflation rate, then the nominal rate...
-
On Cartesian axes, the x-component of a vector is generally associated with a (a) cosine, (b) sine, (c) tangent, (d) none of the foregoing.
-
What process do you follow to make decisions for these different circumstances, and are you satisfied with the results?
-
A football is thrown on a long pass. Compared to the balls initial horizontal velocity component, the velocity at the highest point is (a) greater, (b) less, (c) the same.
Study smarter with the SolutionInn App