Exercise 5–29 (concluded)
When payments are received, gain on sale of land is recognized, calculated by
April 1, 2018
To record cash collection from installment sale
To recognize profit from installment sale
April 1, 2019
To record cash collection from installment sale
To recognize profit from installment sale
Exercise 5–30
The FASB Accounting Standards Codification represents the single source of
appropriate for revenue recognition, the appropriate citation is:
FASB ASC 605–10–25–4: “Revenue Recognition–Overall–Recognition–
installment method is not acceptable).
Exercise 5–31
2018:
Revenue: $40
2019:
Revenue: $80
2020:
Revenue: $100 ($220 contract price – 40 – 80)
Exercise 5–32
As written, the question implies that there is no VSOE (vendor specific sales price
Requirement 1
Revenue should be recognized at date of shipment of the upgrade, which
Requirement 2
July 1, 2018
To record sale of software
If instead the Exercise had said that Easywrite sold each of those components
component, and the correct answer would be:
Requirement 1
Revenue should be recognized as follows:
The amounts are determined by an allocation of total contract price in
proportion to the individual fair values of the components if sold separately:
Total $243 ,000
Exercise 5–32 (concluded)
Requirement 2
July 1, 2018
Deferred revenue ($27,000 + 27,000)……………………….. 54,000
To record sale of software
Exercise 5–33
Requirement 1
Conveyer ($20,000 ÷ 50,000) x $45,000 = $18,000
Total $45,000
Requirement 2
All $45,000 of revenue is delayed until installation of the conveyer,
Exercise 5–34
Requirement 1
Conveyer ($20,000 ÷ 50,000) x $45,000 = $18,000
Total $45,000
Requirement 2
Under IFRS, it’s likely that Richardson would recognize revenue the
Exercise 5–35
October 1, 2018
Deferred revenue – franchise fee………………………….. 300,000
To record franchise agreement and down payment
January 15, 2019
To recognize franchise fee revenue
PROBLEMS
Problem 5-1
Requirement 1
a Number of performance obligations in the contract: 2.
The unlimited access to facilities and classes for one year is one performance
and the seller’s role is not to integrate and customize them to create one product
or service. So, the discount coupon qualifies as a performance obligation.
b To allocate the contract price to the performance obligations, we should first
consider that Fit & Slim would offer a 10% discount on the yoga course to all
likelihood of exercising the option).
F&S’s estimated stand-alone selling price of the discount option is:
Value of the yoga discount voucher:
Total of stand-alone prices $750
Problem 5-1 (continued)
F&S must identify each performance obligation’s share of the sum of the
stand-alone selling prices of all deliverables:
Yoga discount voucher: $30 = 4%
$30 + 720
100%
F&S then allocates the total selling price based on stand-alone selling prices, as
follows:
The journal entry to record the sale is:
Cash 700
$700
Transaction Price
Gym membership
Yoga discount voucher