BUSINESS COLLEGE

On October 1, a client pays a company the full $12,000 balance of a year-long contract. Using the accrual method, what's the unearned revenue as of December 31

Answers

Answer 1
Answer:

Using the accrual method, the unearned revenue as of December 31 is $12,000.

What is Unearned revenue?

Unearned revenue can be defined as the amount a company received from their client for the service they are yet to rendered.

Since the company has received full balance for the services not yet provided. The unearned revenue as of December 31 will be $12,000 .

Reason been that the amount that the client paid the company is for a year-long contract, hence the $12,000 represent a prepayment amount for the service the company is yet to rendered to their client

Inconclusion using the accrual method, the unearned revenue as of December 31 is $12,000.

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Answer 2
Answer:

The $12,000 payment is for a one-year contract, however, we will only record revenue from October 1 up to December 31 which are the months that already lapsed. The remaining nine months are still considered unearned revenue. Thus, the remaining unearned revenue is $9,000.

Unearned revenue is the amount received from a client for a service that has yet to be rendered. Since the company has received the full balance over the services not yet provided. As of December 31, the unearned revenue will be $12,000.

Because the client paid the company for a year-long contract, the $12,000 represents a prepayment for the service the company has yet to render to their client. Using the accrual method, the revenue that is not earned as of December 31 is $9000.

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Ambrosia Foods produces a gourmet condiment that sells for $ 22 per unit. Variable cost is $ 8 per​ unit, and fixed costs are $ 8,000 per month. If Ambrosia expects to sell 1,500 ​units, compute the margin of safety in units

Answers

Answer:

Margin of safety in units = 590.9 units (approx. 591 units)

Explanation:

To calculate this, we have to determine the margin of safety in terms of cash/amount, then convert it to units.

The margin of safety in this case is defined as the difference between the selling price and the break even point. It can simply be explained as the profit made on selling a product, gotten after deduction cost of production.

First of all, let us calculate the total cost of production for 1,500 units;

variable cost;

1 unit = $8

∴ 1,500 units = 1500 × 8 = $12,000

Fixed cost = $8,000

Therefore total cost of production = variable cost + fixed cost

= 12,000 + 8,000 = $20,000

Next, let us calculate the selling price;

1 unit = $22

∴1,500 units = 1,500 × 22 = 33,000

safety margin in cash = Selling price - cost price = 33,000 - 20,000

= $13,000

To convert this amount to units, let us find out how many units are sold for $13,000 as follows;

$22 = 1 units

∴ $13,000 units = (1/22) × 13,000 = 590.9 units

Seasons Construction is constructing an office building under contract for Cannon Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $1,550,000 each quarter. The total contract price is $18,600,000 and Seasons estimates total costs of $17,750,000. Seasons estimates that the building will take 3 years to complete, and commences construction on January 2, 2018. 18). Seasons Construction completes the remaining 25% of the building construction on December 31, 2020, as scheduled. At that time the total costs of construction are $18,750,000.What is the total amount of Revenue from Long-Term Contracts and Construction Expenses that Seasons will recognize for the year ended December 31, 2020?


Revenue Expenses

(A) $18,600,000 $18,750,000

(B) $4,650,000 $ 4,687,500

(C) $4,650,000 $ 5,250,000

(D) $4,687,500 $ 4,687,500

Answers

Answer:

(C) $4,650,000 $ 5,250,000

Explanation:

total contract price is $ 18,600,000

season construction using percentage of completion method.

Amount of revenue & construction expense for the year ended december 31, 2020 will be

25% of $ 18,600,000 revenue = $ 4,650,000

25% of $ 18,750,000 total cost = $5,250,000

Manufacturing companies normally have three types of inventory: Select one: a. Economy, standard, and deluxe. b. Direct materials, direct labor, and manufacturing overhead. c. Raw materials, work in process, and finished goods. d. Work in process, finished goods, and returned merchandise.

Answers

Answer:

C. Raw materials, work in process, and finished goods.

Explanation:

Inventories are materials which have monetary value, and are assets to a company. An inventory can in the form of RAW MATERIALS (inventories which has not be used or converted in the production process), A WORK IN PROGRESS (materials which are within the production or conversion process, they have been partially transformed but not yet completed) and the FINISHED PRODUCTS ALSO CALLED FINISHED GOODS(materials which has undergone complete Transformation and are ready to be sold to the market).

Mary, a merchant, was in the business of selling flowers to local florists. Melissa was the owner of Little Flower, Inc. and she regularly purchased her flowers from Mary. One day, Melissa called Mary and ordered 20 dozen roses, 15 dozen carnations, 10 dozen daisies, baby breaths, 6 dozen tulips, and some plants. Everything totaled $1,200, and was to be delivered in 14 days. After the two ended their call, Mary sent Melissa an e-mail detailing the order and her acceptance. Melissa never responded to the e-mail. Eleven days later, Mary delivered the merchandise to Melissa, but she refused shipment. Mary sued Melissa for breach of contract. What is the likely result? Mary wins because the contract involved specially manufactured goods. Mary loses because Melissa did not sign anything. Mary loses because the contract was not in writing. Mary wins because Melissa failed to object to the merchant's confirmation memorandum.

Answers

Answer:Mary wins because Melissa failed to object to the merchant's confirmation memorandum.

Explanation:

A contract is first establish based on offer and acceptance between two parties. The telephone conversation of Mellisa to Mary constitute a valid offer and the email communication of Mary constitute a valid acceptance.

Furthermore the time interval between the email communication and delivery of the goods are enough period for Mellisa to counter the acceptance memorandum of Mary which she failed to carry out. This is the reason Mary wins.

Arness Woodcrafters sells $300,000 of receivables to Commercial Factors, Inc. on a with recourse basis. Commercial assesses a finance charge of 6% and retains an amount equal to 3% of accounts receivable. Arness estimates the fair value of the recourse obligation to be $8,000. Prepare the journal entry for (a) Arness and (b) Commercial Factor

Answers

Answer:

(a)  Journal entry for Arness Woodcrafters

Dr Cash 273,000

Dr Receivable from factor 9,000

Dr Loss on sale of receivables 26,000

    Cr Accounts receivable 300,000

    Cr Recourse factor 8,000

the amount of cash received = $300,000 x (1 - 6% - 3%) = $273,000

receivable from factor = $300,000 x 3% = $9,000

loss on sale = accounts receivable + recourse factor - cash - receivable = $300,000 + $8,000 - $273,000 - $9,000 = $26,000

(b) Journal entry for Commercial Factors

Dr Accounts receivable 300,000

Dr Recourse receivable 18,000

    Cr Cash 273,000

    Cr Accounts payable 9,000

    Cr Recourse revenue 36,000

Flex Co. just paid total dividends of $1,100,000 and reported additions to retained earnings of $3,300,000. The company has 725,000 shares of stock outstanding and a benchmark PE of 17.4 times. What stock price would you consider appropriate

Answers

Answer:

$105.60

Explanation:

Given: Total dividend paid= $1100000.

           Retained earning= $3300000.

           Number of outstanding shares= 725000.

           PE ratio= 17.4 times.

First finding earning per share.

Formula; EPS= ((paid\ dividend+ additional\ retained\ earning))/(number\ of\ outstanding\ shares)

⇒ EPS= ((1100000+3300000))/(725000)

⇒ EPS= (4400000)/(725000)

∴ EPS= \$ 6.0689 \approx \$ 6.07

Hence, earning per share (EPS)= $6.07.

Now, finding the appropriate stock price.

Price of stock= EPS* PE

⇒ Price of stock= \$ 6.07* 17.4

∴ Price of stock=\$ 105.60

Hence, $105.60 would be the appropriate price of stock.
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