EXERCISE 18.15 (10–15 minutes)
(a) The separate performance obligations are the oven, installation, and
maintenance service, since each item has standalone selling price to
EXERCISE 18.16 (20–25 minutes)
(a) 1. The journal entries to record sales and related cost of goods sold
2. The journal entries to record sales returns are as follows.
March 25, 2019
EXERCISE 18.16 (continued)
3. The adjusting journal entries required to record estimated
remaining returns are as follows.
March 31, 2019
(b) Financial Statement Presentation
Income Statement (partial)
For the quarter ended March 31, 2019
Statement of Financial Position (partial)
At March 31, 2019
Accounts receivable ($10,000 – $300) $9,700
(a)
March 10, 2019
Accounts Receivable (200 X $50) …………. 10,000
EXERCISE 18.16 (continued)
Cost of Goods Sold ……………………………….. 6,000
Inventory ………………………………………. 6,000
March 25, 2019
Allowance for Sales Returns and
March 31, 2019
No entries required.
(b) Financial Statement Presentation
Income Statement (partial)
For the quarter ended March 31, 2019
EXERCISE 18.17 (15–20 minutes)
(a) 1. The journal entries to record sales and related cost of goods sold
are as follows.
March 10, 2019
2. The journal entries to record sales returns are as follows.
March 25, 2019
3. The adjusting journal entries required to record estimated
remaining returns.
EXERCISE 18.17 (continued)
(b) Financial Statement Presentation
Income Statement (partial)
For the quarter ended March 31, 2019
Statement of Financial Position (partial)
At March 31, 2019
NOTE TO INSTRUCTOR: Some companies may choose to record sales
revenue net. If sales are recorded net, the entries are as follows.
(a)
March 10, 2019
Cash (200 X $50) …………………………………….. 10,000
EXERCISE 18.17 (continued)
The journal entries to record the return is as follows.
March 25, 2019
Refund Liability (6 X $50) …………………….. 300
(b) Financial Statement Presentation
Income Statement (partial)
For the quarter ended March 31, 2019
EXERCISE 18.18 (20-25 minutes)
(a) 1. The journal entries to record sales and related cost of goods sold
are as follows.
October 2, 2019
2. The journal entry to record the allowance is as follows.
October 16, 2019
3. The adjusting journal entry to record estimated remaining
allowances is as follows.
(b) Financial Statement Presentation
Income Statement (partial)
EXERCISE 18.18 (continued)
Statement of Financial Position (partial)
At October 31, 2019
(a)
1. October 2, 2019
Accounts Receivable (200 X $30) …………. 6,000
Allowance for Sales Returns
2. The journal entries to record the allowance is as follows.
October 16, 2019
3. The adjusting journal entry to record estimated remaining
allowances is as follows.
October 31, 2019
EXERCISE 18.18 (continued)
(b) Financial Statement Presentation
Income Statement (partial)
For the quarter ended March 31, 2019
Net sales revenue ($5,200 + $150) $5,350
Cost of goods sold 3,600
EXERCISE 18.19 (15–20 minutes)
(a) The journal entries to record sales and related cost of goods sold are
as follows.
June 3, 2019
Accounts Receivable ………………………….. 8,000
Sales Revenue ………………………….. 8,000
The journal entries to record the return is as follows.
June 8, 2019
Sales Returns and Allowances …………….. 300
Accounts Receivable …………………… 300
The journal entry to record delivery cost is as follows.
June 8, 2019
July 16, 2019
NOTE TO INSTRUCTOR: Some companies may choose to record sales
revenue net. If sales are recorded net, the entries are as follows.
EXERCISE 18.19 (continued)
June 3, 2019
Accounts Receivable………………………….. 8,000
Allowance for Sales Returns
and Allowances ………………………. 800
Sales Revenue ………………………….. 7,200
June 8, 2019
Allowance for Sales Returns and Allowances 300
Accounts Receivable ………………….. 300
June 8, 2019
Delivery Expense ………………………………… 24
Cash …………………………………………… 24
July 16, 2019
EXERCISE 18.20 (25–30 minutes)
(a) Sales reported gross at point of sale.
January 2, 2019
Accounts Receivable ………………………….. 1,500,000
(b) March 1, 2019
Sales Returns and Allowances …………….. 100,000
Accounts Receivable …………………… 100,000
(c) March 31, 2019
Sales Returns and Allowances …………….. 200,000
NOTE TO INSTRUCTOR: Some companies may choose to record sales
revenue net. If sales are recorded net, the entries are as follows.
EXERCISE 18.20 (continued)
(a) January 2, 2019
Accounts Receivable ……………………………….. 1,500,000
Allowance for Sales Returns and
(b) March 1, 2019
Allowance for Sales Returns and
Allowances ……………………………………. 100,000
Accounts Receivable ………………………… 100,000
(c) March 31, 2019
No adjusting entries are needed, because the original estimates still
apply.
EXERCISE 18.21 (15–20 minutes)
(a) Uddin should recognize revenue at the point of sale based upon the
(b) Based on the available information, the correct treatment is to
recognize revenue when the performance obligation is satisfied – in
(5) collection is probable.
(c) The entries to record the sale of the textbooks and related cost of
goods sold are as follows:
July 1, 2019
(d) The entries to record the returns, related cost of goods sold, and cash
payment are as follows:
October 3, 2019
Sales Returns and Allowances …………….. 1,500,000
EXERCISE 18.21 (continued)
(e) On October 31, 2019, Uddin prepares financial statements
On Uddin’s income statement, the following information is reported.
Accounts receivable $0
Returned inventory $1,200,000
(a)
July 1, 2019
Accounts Receivable ……………………………….. 15,000,000
Allowance for Sales Returns and
EXERCISE 18.21 (continued)
(b)
Inventory Returned on October 3, 2019
Allowance for Sales Returns and
(c) On October 31, 2019, Uddin prepares financial statements. As no other
returns are expected the following entry is made to close out the
allowance.
On Uddin’s income statement, the following information is reported.
Net sales 13,500,000
EXERCISE 18.22 (20–25 minutes)
(a) In this case, due to the agreement to repurchase the equipment,
Cramer continues to have the control of the asset and therefore this
agreement is a financing transaction and not a sale. That is, if the
(b) December 31, 2019
Interest Expense ……………………………………… 1,200
(c) June 30, 2020
Interest Expense ……………………………………… 1,200
Liability to Enyart Company
(€40,000 X 6% X 1/2) ……………………….. 1,200
EXERCISE 18.23 (10–15 minutes)
Because Zagat has an unconditional obligation (forward) to repurchase the
ingots at an amount greater than the selling price, the transaction is treated
as a financing.
(a) March 1, 2019
The selling price of the ingots is $200,000. Zagat would record the
(b) May 1, 2019
Interest Expense (€200,000 X 2%) ……………… 4,000
EXERCISE 18.24 (10–15 minutes)
(a) This transaction is a bill-and-hold situation. Delivery of the counters is
(b) Revenue is reported at the time title passes if the following conditions
are met:
(1) The reason for the bill-and-hold arrangement must be substantive.
EXERCISE 18.24 (continued)
(c) Cash ……………………………………………………….. 300,000
EXERCISE 18.25 (5–10 minutes)
(a) Inventoriable costs:
80 units shipped at cost of $500 each ………… $40,000
(b) Computation of consignment profit:
Consignment sales (40 X $750) ………………….. $30,000
Cost of units sold (40/80 X $40,840) …………… (20,420)
(c) Remittance of consignee:
Consignment sales ………………………………………….. $30,000
Less: Commissions ………………………………………… $1,800
EXERCISE 18.26 (10–15 minutes)
(a) January 2, 2019
Cash ………………………………………………………………… 50,000
Sales Revenue …………………………………………… 50,000
During 2019
(b) January 2, 2019
Cash ($50,000 + $800) ……………………………………….. 50,800
Sales Revenue …………………………………………… 50,000
Unearned Warranty Revenue (Service-type) … 800
During 2019
Grando recognizes $400 of revenue on the service type warranty in 2021 and
2022. Warranty costs in the extended warranty period will be expensed as
incurred.