Revenue Recogntion Examples
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Note for question 2: Received payment from the following customers. The amount shown do not include any discount.
You must determine if a discount is appropriate, and if so, how much. Madison Music Store awards
partial discounts for payment on account. The sales Amount Colum indicatrs the "sales amount obligation
discharged with the payment os a receivable. It does not refer to a specific sale. For example, if the
column shows $100, the correct entry would be to debit cash for $105.00 and credit accounts receivable
for $105 (assuming a sales tax at 5%)
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 = S100.00). Purchases are recorded at net price For example, a purchase
of a $1,000.00 item on terms of 2110, net 30 is booked at $980.00.
December 30 (Tuesday )
1.) Sold merchandise to the following .
Customer's Name Terms Amount
Racer High School cash $2,000.00
Stereo Magic 2/10, n/30 1,000.00
Knotes, Inc. 2/10, n/30 500.00
2.) Received payment from the following customers.The amounts shown do not include any
discount. You must determine if a discount is appropriate, and if so, how much . Refer to
above Bolded Note.
Customer's Name Terms Sales Aunount
Stereo Magic 3/10,n/30 $2,200 .00
Zenith Music 3/10,n/30 1,840 .00
3.) Purchased merchandise from the following :
Creditor's Name Terms Amount
Memrex Music 2/10,n/30 $300 .00
Melody Hit n/30 $500.00
4.) Mr. Madison returned $300 .00 worth of merchandise to Bose Music Stcre .
5.) Recorded and paid delivery expense of $100 .00 (use delivery expense account) .
6.) The board of directors declared and paid dividends to stockholders in the amount of $1,250.00
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Solution Summary
This post contains a formatted MS Excel spreadsheet that contains examples of revenue recognition.
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Please find attached, a formatted MS Excel file containing the information below. I have also included a notes section which may help to increase understanding of the material in this exercise.
Note for question 2:
Received payment from the following customers. The amount shown do not include any discount. You must determine if a discount is appropriate, and if so, how much. Madison Music Store awards partial discounts for payment on account. The sales Amount Colum indicates the "sales amount obligation discharged with the payment so a receivable. It does not refer to a specific sale. For example, if the column shows $100, the correct entry would be to debit cash for $105.00 and credit accounts receivable for $105 (assuming a sales tax at 5%)
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 = ...
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