Festi Corp. is evaluating if revenue may be recognized for two of their contracts. The customer...
Question:
Festi Corp. is evaluating if revenue may be recognized for two of their contracts. The customer in Contract A has indicated that they are ready to accept the transfer of the products associated with the contract, but delivery has not yet occurred. The customer in Contract B has received legal title to the products but has asked Festi to store the products for them until they open the new stores for which the product has been ordered. Festi has clearly labeled and set aside the products in the warehouse for the customer in Contract B, but delivery has not yet occurred.
Should revenue be recognized for:
| Contract A | Contract B | |
| a | Yes | No |
| b | No | Yes |
| c | No | No |
| d | Yes | Yes |
Revenue Recognition:
According to Revenue Recognition concept, the revenues are recognized when the goods are transferred or services are rendered irrespective of whether the cash is received or not.
Answer and Explanation: 1
Become a Study.com member to unlock this answer! Create your account
View this answerThe answer to the above question is |b|No|Yes
Explanation:
In contract B, since the title of the goods is transferred to customer B, the revenue...
See full answer below.
Ask a question
Our experts can answer your tough homework and study questions.
Ask a question Ask a questionSearch Answers
Learn more about this topic:
Get access to this video and our entire Q&A library
What is Revenue Recognition? - Principles, Process & Examples
from
Chapter 7 / Lesson 2
23K
Revenue recognition states that revenue is recorded when it is realized, or realizable and earned, as opposed to received. Learn about the principles and process of revenue recognition with examples of recognition criteria before exploring some exceptions to the rule.
Related to this Question
- Fundamentals of Revenue Recognition: 1. A wholly unperformed contract is one in which the company has neither transferred the promised goods or services to the customer nor received, or become entitle
- Four conditions must be met before revenue should be recognized. In each of the following cases, tell which condition has not been met. a. Company A accepts a contract to perform services in the future for $2,000. b. Company B ships products worth $3,000
- If a company recognized deferred revenue on warranty contracts, how would it recognize this revenue in subsequent periods?
- A company should only apply the revenue recognition standard to contracts that meet all of the following criteria except: a. collectability of consideration is probable. b. the transaction price is fixed and determinable. c. the contract has commercial su
- Which of the following is/are criteria for recognizing revenue from a sale? a. Title and risks of ownership have been exchanged. b. The company is reasonably assured of collecting the receivable. c. The customer has, in turn, sold the product to its ow
- P, Q, and R have equities in a partnership of $60,000, $90,000, and $50,000 respectively, and share income and losses in a ratio of 2:1:2 respectively. The partners have agreed to admit S to the partnership. Prepare entries in journal form without explan
- A parent of a wholly owned subsidiary shipping company ships products, using the subsidiary with shipping terms FOB shipping point. The Subsidiary derives only 2% of their revenue from the Parent. Can the Parent recognize revenue when the product is picke
- As part of the acquisition agreement, Parma Corporation agrees to pay the former shareholders of Stow Company $2 in cash for every dollar of gross revenues above $30,000,000 reported by Stow at the en
- Under which of the following circumstances will a partner recognize a gain from a non-liquidating distribution? a. A partner will never recognize a gain from a non-liquidating distribution. b. A partner will recognize a gain from a non-liquidating distrib
- What conditions are required for a partner to recognize a loss upon receipt of a distribution from a partnership?
- Your client, Lewison International, has informed you that it has reached an agreement with Herro Company for the purchase of all of Herro's assets. This transaction will be accomplished through the issue of Lewison's common stock. After your examination o
- T & U form a partnership with initial investments of $100,000 and $200,000 respectively. Their agreement calls for a salary to T of $40,000 and a salary to U for $60,000. Each partner is to receive in
- K and L allow Z to purchase a 25% interest in their partnership for 25,000. Z is being admitted to the partnership. K and L capital account balances are 80,000 each. The partners have agreed to share income or loss equally. As a result of allowing the adm
- Derek and Hailey, partners sharing net income in the ratio of 2:1, admit Ben to the partnership in accordance with the following agreement: (1) Merchandise inventory recorded in the partnership accoun
- Does a partnership really have to reconstitute itself legally, and, if so, would it be wise to do so without a formal agreement? Explain and support your response. What key terms would you as a prospective partner require in a partnership agreement?
- Ambros transfers property (the basis of $320,000 and fair market value of $210,000) to Weikhard Corporation in exchange for shares of � 1,244 stock. Note: Assume that the transfer qualifies under
- Antoine transfers property with a tax basis of $500 and a fair market value of $600 to a corporation in exchange for stock with a fair market value of $550 in a transaction that qualifies for deferral
- Under which of the following circumstances will a partner recognize a loss from a non-liquidating distribution? a. A partner will never recognize a loss from a non-liquidating distribution. b. A partner will recognize a loss from a non-liquidating distrib
- Antoine transfers property with a tax basis of $500 and a fair market value of $600 to a corporation in exchange for stock with a fair market value of $550 in a transaction that qualifies for deferral under section 351. The corporation assumed a liabilit
- As part of the acquisition agreement, Parma Corporation agrees to pay the former shareholders of Stow Company $0.40 in cash for every dollar of gross revenues above $4,500,000 reported at the end of t
- If the entity received a donated asset the entity must: a. recognise an income. b. recognises an asset and an income. c. recognise a liability. d. recognise an asset.
- Hewlett and Martin are partners. Hewlett's capital balance in the partnership is $57,500, and Martin's capital balance $54,500. Hewlett and Martin have agreed to share equally in income or loss. The existing partners agree to accept Black with a 20% inter
- A) Does the partnership really have to reconstitute itself legally, and, if so, would it be wise to do so without a formal agreement? Explain and support your response. B) What key terms would you as a prospective partner require in a partnership agreemen
- Antoine transfers property with a tax basis of $500 and a fair market value of $600 to a corporation in exchange for stock with a fair market value of $550 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability
- For audit purposes, a corporation's articles of incorporation are normally: a) Copied and placed on the owners' equity lead schedule. b) Copied and placed in the permanent file. c) Confirmed with the transfer agent. d) Ignored since they are not normally
- On September 17, 2013. Ziltech, Inc. entered into an agreement to sell one of its divisions that qualifies as a component of the entity according to generally accepted accounting principles. By Decemb
- Sue has contacted you, a certified public accountant, about the following concern. She would like to attract some investors, but she believes that in order to recognize revenue she must first "deliver" the product. Therefore, on her balance sheet, she did
- Kim transfers property with a tax basis of $1,120 and a fair market value of $810 to a corporation in exchange for stock with a fair market value of $620 in a transaction that qualifies for deferral u
- It is agreed in the partnership agreement of R and B that profit and loss sharing arrangements will be based on the ratio of the partner?s capital balances. R and B have capital balances of $75,000 and $50,000 respectively at the end of the accounting per
- Roberts and Smith drafted a partnership agreement that lists the following assets contributed at the partnership's formation: Contributed by Roberts Smith Cash $20,000 $30,000 Inventory 0 15,000 Build
- On April 1, 20Y1, Whitney Lang and Eli Capri form a partnership. Lang agrees to invest $18,000 cash and merchandise inventory valued at $50,000. Capri invests certain business assets at valuations agreed upon, transfers business liabilities, and contribut
- X, Y, and Z are partners in firm sharing profits in 7:6:4 ratios. Their respective fixed capitals are Rs. 80,000, Rs.40,000, and Rs.50,000. Rate of interest on capital was agreed @ 10% p.a. but was wrongly credited to them as 12% p.a. Give the necessary a
- Bob and Carl transfer property to Stone Corporation for 90 percent and 10 percent of Stone Stock, respectively. Pursuant to binding agreement concluded before the transfer, Bob sells half of his stock to Carl. Prepare a memorandum for your tax manager ex
- The capital investment committee of Ellis Transport and Storage Inc. is considering two investment projects. The estimated income from operations and net cash flows from each investment are as follows: Year Warehouse Tracking Technology Income from operat
- Rachelle transfers property with a tax basis of $800 and a fair market value of $900 to a corporation in exchange for stock with a fair market value of $750 and $50 in a transaction that qualifies for
- T transfers a building ($90,000 market value; $40,000 basis), plus a $60,000 nonrecourse debt on the building, to a partnership in exchange for a 30% capital interest valued at $30,000. If T retains personal liability for the debt, what is T's basis in hi
- Under which of the following circumstances will a partner recognize a loss from an operating distribution? a. A partner will never recognize a gain from an operating distribution. b. A partner will recognize a gain from an operating distribution when th
- Casey transfers property with a tax basis of $2,000 and a fair market value of $5,000 to a corporation in exchange for stock with a fair market value of $4,000 and $400 in a transaction that qualifies
- Capital leases and operating leases are the two classifications of leases described in FASB pronouncements from the standpoint of the lessee.
- A is a partner in the equal ABC partnership, and is distributed a note from the partnership for $30,000, payable by the partnership. A then sells the note for $27,000. A's basis in the partnership when the note was distributed was $25,000. 1. What are th
- A partnership distributes inventory with a basis of $30,000 and a value of $60,000 to its three partners who have a total basis of $90,000 in their partnership interest. The distribution is non-liquidating. The partnership recognizes gain on the distribut
- Camille transfers property with a tax basis of $800 and a fair market value of $1,200 to a corporation in exchange for stock with a fair market value of $850 and $350 in a transaction that qualifies for deferral under Section 351. Camille also incurred se
- Evelyn incorporates her sole proprietorship, transferring it to newly formed Papaya Corporation. The assets transferred have an adjusted basis of $400,000 and a fair market value of $500,000. Also transferred was $50,000 in liabilities, $1,000 of which wa
- One method of distributing income and losses is to give each partner a stated ratio of the total income or loss. There are two partners Jerry & Rose, each making an equal contribution to the firm (50/50). However, the partnership agreement states that dis
- Doug's Conveyor Systems, Inc., is considering two investment proposals (1 and 2). Data for the two proposals are presented here:
- Partners A and B have agreed to share profits and losses in an 80:20 ratio respectively after A is allowed a salary allowance of 30,000 and B is allowed a salary allowance of 15,000. If the partnership had a net income of 30,000 for 2014, B's share of the
- On March 1, 2016, Eric Keene and Abigail McKee form a partnership. Keene agrees to invest $20,900 in cash and merchandise inventory valued at $55,950. McKee invests certain business assets at valuations agreed upon, transfers business liabilities, and con
- Write a statement of partners' equity showing the allocation of income to the partners assuming they agree to use plan (c), that income earned is $237,900, and that Bill, Bruce, and Barb withdraw $44,100, $58,100, and $74,100, respectively, at year-end.
- Goodwill may be recorded when a. it is identified within a company. b. one company acquires another in a business combination. c. the fair value of a company's assets exceeds their cost. d. a company has exceptional customer relations.
- Camille transfers property with a tax basis of $800 and a fair market value of $1,200 to a corporation in exchange for stock with a fair market value of $850 and $350 in cash in a transaction that qualifies for deferral under section 351. Camille also inc
- Inez transfers property with a tax basis of $200 and a fair market value of $300 to a corporation in exchange for stock with a fair market value of $250 in a transaction that qualifies for deferral under Section 351. The corporation assumed a liability of
- The capital investment committee of Ellis Transport and Storage Inc. is considering two investment projects. The estimated income from operations and net cash flows from each investment are as follows: Warehouse Tracking Technology Year Income from Oper
- Investor A transferred property worth $1,000,000 to Corporation A - Investor A's adjusted basis in the property was $250,000 - Investor A recognized a gain on the transfer of $575,000 What is Corpo
- The capital investment committee of Cross Continent Trucking Inc. is considering two investment projects. The estimated income from operations and net cash flows from each investment are as follows: Warehouse Tracking Technology Year Income from Operatio
- Mitre Company acquired Midwest Transportation Co. for $1,400,000. The fair market values of the assets acquired were as follows and no liabilities were assumed. EQUIPMENT $510,000 LAND 150,000 BUILDI
- Jay contributes property with a fair market value of $16,000 and an adjusted basis of $5,000 to a partnership in exchange for an 8% partnership interest. A) Calculate the amount of gain recognized by
- The following data are accumulated by Eco Labs Inc. in evaluating two competing capital investment proposals: Testing EquipmentVehicle Amount of investment$52,000$88,000 Useful
- Bob is a general partner in Fresh Foods Partnership and is trying to determine if the income reported on his K-1 should be classified as passive or active trade or business income. List three differen
- T Transfers a building ($90,000 market value, $40,000 basis) plus a $60,000 recourse debt on the building, to a general partnership in exchange for a 30% capital and profits interest valued at $30,000. U transfers $70,000 cash for the remaining capital an
- Jed Castanza transfers $90,000 of cash to the JN partnership for a 60 percent interest in the JN partnership. Ned transfers a building with an adjusted basis of $30,000 and a fair market value of $100,000, subject to a debt of $40,000 that the partnership
- Chip and Dale agree to form a partnership by verbal agreement and a handshake. Chip is to contribute $50,000 in assets and devote 1/2 time in the partnership. Dale is to contribute $20,000 and devote full time to the partnership. How will Chip and Dale sp
- The Nice, Rice, and Dice Partnership has not been successful. The partners have determined they must liquidate their partnership. The partners have agreed to liquidate the partnership and anticipate t
- Ester transfers land (basis of $200,000 and fair market value of $355,000) to a controlled corporation in return for stock in the corporation. However, shortly before the transfer, Ester mortgages the
- K.Gillan, C.Coduri, and C.Tate share income on a 5 : 3 : 2 basis. They have capital balances of $30,000, $26,000, and $18,000, respectively, when Cap Harkness is admitted to the partnership. Prepare
- Given a business combination with intercompany supplier-purchaser relationships, explain intercompany treatment of inventory and fixed asset transactions between the parent and subsidiary including re
- If two or more sole proprietors combine their businesses to form a partnership, the basis for the opening entries for the investments of such partners is based on their respective A) balance sheet B) income statement C) statement of owners' equity D)
- Hall Corporation reported the following operating results for two consecutive years. Required: Compute the percentage changes in Hall Corporation's income statement components between the two years.
- Scott has transferred some property to a corporation in a Section 351 transaction. In turn, Scott received property as well as stock from the same corporation. Under Section 351, the implications of this transfer for Scott would be that: A. he could reco
- When dealing with the liquidation of a partnership interest, a partner will: a. never recognize a loss. b. only recongnize a loss when property, intentory, and/or receivables are distributed. c. on
- Esquerra Corporation has provided the following data concerning its two products-T85 and G34: | |T85|G34 |Monthly unit demand|7,100 |4,300 |Selling price|$366.00 |$258.00 |Unit variable cost|$171.
- Rex contributed land to the partnership of Rex, Tex, and La Partnership in exchange for a one-third interest in the Partnership. Rex's adjusted basis in the land was $50,000 and its fair market value was $75,000. Rex's Partnership capital account was cred
- Hall Corporation reported the following operating results for two consecutive years. Required Compute the percentage changes in Hall Corporation's income statement components between the two years. HA
- Skiba Company is thinking about two different modifications to its current manufacturing process. The after-tax cash flows associated with the two investments follow : Year ; Project I ; Project II ;
- Reed, Sharp, and Tucker were partners with capital account balances of $80,000, $100,000, and $70,000, respectively. They agreed to admit Upton to the partnership. Upton purchased 30% of each partner's interest, with a payment directly to Reed, Sharp, and
- Carlos transfers property with a tax basis of $500 and a fair market value of $800 to a corporation in exchange for stock with a fair market value of $650 and $50 in a transaction that qualifies for deferral under section 351. The corporation assumed a l
- Prepare an income statement for 2014, indicating the division of net income.The partnership agreement provides for salary allowances of 45,000 to Lambert and 54,700 to Yost, allowances of 10% on each partner's capital balance at the beginning of the fisc
- Entries and balance sheet for partnership On March 1, 2016, Eric Keene and Abigail McKee form a partnership. Keene agrees to invest $21,100 in cash and merchandise inventory valued at $55,900. McKee i
- Which of these would not normally be referred to in a partnership agreement? a. Profit and loss sharing ratios. b. Arrangements to terminate the partnership. c. Procedures to follow in the event of a dispute. d. How GST is calculated.
- In the liquidation of a partnership with the assets distributed proportionately to the partners, A receives cash of $400 and land with a fair market value of $600 and an adjusted basis $350. Before the liquidation, A's adjusted basis in her partnership in
- At your first job after graduation, you start working for a local CPA firm. The firm's partner mentions that partnerships are often not accounted for under accrual accounting. You are surprised since you assumed that all entities are accounted for under a
- In the AD partnership, Allen's capital is $140,000 and Daniel's is $40,000 and they share income in a 3:1 ratio, respectively. They decide to admit David to the partnership. Each of the following ques
- Reed, Sharp, and Tucker were partners with capital account balances of $80,000, $100,000, and $70,000, respectively. They agreed to admit Upton to the partnership. Upton purchased 30% of each partner's interest, with payments directly to Reed, Sharp, and
- Lynn transfers land having a $50,000 adjusted basis, an $80,000 FMV, and $10,000 cash to Allied Corporation in exchange for 100% of allied stock. The corporation assumes the $70,000 mortgage on the land. Which of the following statements is correct? A) Ly
- WiFi Corporation, a U.S. firm, signs a contract with Bueno Computadores, Ltd., an Argentinean firm, for a shipment and payment for WiFis goods. This is a. a distribution agreement. b. a joint venture. c. direct exporting. d. licensing.
- On March 1, 20Y8, Eric Keene and Renee Wallace form a partnership. Keene agrees to invest $23,400 in cash and merchandise inventory valued at $62,600. Wallace invests certain business assets at valuations agreed upon, transfers business liabilities, and c
- Two companies are financed as follows: X Co. Y Co. Bonds Payable, 9% issued at face $ 5,000,000 $ 3,000,000 Common stock, $25 par 3,000,000 3,000,000 Income tax is estimated at 40% of income for both companies Determine for each company the earnings pe
- Susan's salary is $44,000 and she received dividends of $600. She received a statement from SJ partnership indicating that her share of the partnership's income was $4,000. The partnership distributed
- Rex contributed land to the partnership of Rex, Tex, and Lex Partnership in exchange for a one-third interest in the Partnership. Rex's adjusted basis in the land was $50,000 and its fair market value
- ABC Co. is acquiring XYZ Inc. XYZ has the following Intangible assets: Patent on a product that is deemed to have no useful life $10,000. Customer List with an observable fair value of $50,000. A 5-year operating lease with favorable terms with a dis
- A company is evaluating between two mutually exclusive projects. The estimated cash flows are indicated below: Year Project A Project B 0 ($100,000) ($5,000) 1 $0 $0 2 $0 $7,500 3 $0 $0 4 $0 $0 5 $0 $0 6 $250,000 $0 a. Calculate the NPV and IRR for both p
- Travis transfers land with a fair market value of $125,000, a basis of $25,000, to a corporation in exchange for 100% of the corporation s stock. What amount of gain must Travis recognize as a result of this transaction? a. $0 b. $25,000 c. $100,000 d
- A client in the 35% marginal tax bracket is comparing a municipal bond that offers a 6.10% yield to maturity and a similar-risk corporate bond that offers a 7.25% yield. Determine the equivalent taxable yield. Which bond will give the client more profit a
- Alpha Co. produces two products: Product A with $2 contribution margin and Product
- Under the terms of their divorce agreement, Tom transferred Google stock to his former wife Tammy, as a property settlement. At the time of the transfer, the stock had a basis to Tom of $35,000 and a fair market value of $40,000. What is the tax consequen
- Does the receipt of securities in exchange for the transfer of appreciated property to a controlled corporation cause recognition of gain? Explain.
- Partnerships are allowed to deduct guaranteed payments to partners for services rendered or use of capital without regard to partnership income or profit and loss sharing ratios. What kind of situation would make guaranteed payments a logical way of start
- Jake and Ness are partners who agree that Jake will receive a $60,000 salary allowance and any remaining income or loss will be shared equally. Assume Ness's capital account is credited for $1,000 as his share of the net income in a given period. How much
- During 2015, Mr. Hill and Mr. Dale formed a corporation to which Hill transferred a patent right that had a fair market value to him of $25,000 and a zero adjusted basis. Dale transferred a building t
- Sandlewood Construction Inc. recognizes revenue over time according to the percentage of completion for its long-term construction contracts. In 2018, Sandlewood began work on a $10,000,000 construction contract, which was completed in 2019. The accountin
- Income is divided between the partners of a partnership with an entry that credits a partner's capital account and debits __________.
Explore our homework questions and answers library
Browse
by subject