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Revenue Recognition Examples

Markup on all sales is 25%. for example, a retail price of $100.00 means the wholesale price
is $80.00 ($80.00 x 1.25 = $100.00). Purchases are recorded at net price. For example, a purchase
of a $1,000.00 item on terms of 2/10, net 30 is booked at $980.00

December 31 (Wednesday)
1.) Sold merchandise to the following .
Customer's Name Terms Sales Amount
Zenith Music 3/10,n/30 $800.00
Audio Court n/30 $1,0000 .00

2.) Paid the following creditors . Calculate discounts if appropriate .

Creditor's Name Terms Amount
Office Equipment Company n/30 $500 .00
Tusk Music Supply 2/10,n/30 2,000 .00
Advent Music Supply n/30 250 .00
Local Supply n/30 300 .00

3.)
Received payment from the following customers . The amounts shown do not include any
discounts. You must determine if a discount is appropriate, and if so, how much. Remember,
do not apply the discount on the sales tax portion of the accounts receivable balance .

Customer's Name Terms Sales Amount
Carol Jason n/30 $300.00
Knotes, Inc. 2/10,n/30 275.00
Zenith Music 3/10,n/30 120.00

4.)
The $100.00 delivery expense recorded on December 30 was actually freight on the December
30 purchase from Memrex Music .

5.)
Racer High School returned $ 150 .00 worth of merchandise purchased an December 30 .
Madison Music gave the school a cash refund .

6.)
Paid $ 75.00 for December delivery expense .

7.)
Mr. Madison informed you that the December 18 sale to Louise Music Center was being
financed for 90 days by Madison Music Store . The note is for $3,750 .00 . Began accruing
interest at 12% annually on December 20 . Mr. Madison recorded the transaction on the 18th
as an accounts receivable .

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Solution Preview

For your convenience, I have attached a formatted MS Excel file containing the text below. I have also provided notes which should help in gaining a better understanding of the provided material.

I am also resubmitting the Help1 and Help2 files, as I have made a slight change to the "sold merchandise to the following consumers" sections in both papers, that will better reflect the movement of merchandise out of inventory with their respective costs being appropriately applied to a Cost of Goods Sold account.

Markup on all sales is 25%. For example, a retail price of $100.00 means the wholesale price is $80.00 ($80.00x 1 .25 = $100.00). Purchases are recorded at ...

Solution Summary

This posting contains a formatted MS Excel spreadsheet that contains examples in the area of revenue recognition

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