Intermediate Acc 1 PDF

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Assignment in intermediate accounting course...

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Intermediate Accounting Chapter 18: REVENUE RECOGNITION

1- New Age Computers manufactures and sells pagers and radio paging systems which include a 180-day warranty on product defects. It also sells an extended warranty which provides an additional two years of protection. On May 10, it sold a paging system for $3,850 and an extended warranty for another $1,200. The journal entry to record this transaction would include: a.

a credit to Service Revenue of $5,050.

b.

a credit to Service Revenue of $1,200

c.

a credit to Sales of $3,850 and a credit to Service Revenue of $1,200

d.

a credit to Unearned Service Revenue of $1,200.

Answer: d

2- Seadrill Engineering licensed software to oil-drilling firms for 5 years. In addition to providing the software, the company also provides consulting services and support to ensure smooth operation of the software. The total transaction price is $350,000. Based on standalone values, the company estimates the consulting services and support have a value of $100,000 and the software license has a value of $250,000. Assuming the performance obligations are not interdependent, the journal entry to record the transaction includes. a.

a credit to Sales Revenue for $250,000 and a credit to Unearned Service Revenue of $100,000.

b.

a credit to Service Revenue of $100,000.

c.

a credit to Unearned Service Revenue of $100,000.

d.

a credit to Sales Revenue of $350,000.

Answer: a...