Case 6-4 Joan Holtz (B)* 1) The 3 methods affect the net income. If deducted from the cost of purchased goods it will affect the cost of good by decreasing it‚ which in turn will affect the net income in the period the product was sold. If the purchase discounts are reported as other income then the net income would be higher than the other methods. If the purchase discount not taken is reported as an expense then too the net income is high. Overall‚ the cost of goods sold will be
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advance payment to the ship owner in 2006. How much‚ if any‚ of the $260‚000 was revenue to Raymond’s in 2006? Why? Does the question of whether passengers were entitled to a refund in 2007 if they canceled their reservations make any difference in the answer? Why? According to the U.S. Securities and Exchange Commission‚ over half of the financial fraud cases involve improper recognition of revenue (Anthony‚ Hawkins‚ & Merchant‚ 2007‚ p.111). Therefore‚ an entity should err on the side of caution when
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Case 8-4: Joan Holtz (D)* Note: This case is unchanged from the Tenth Edition. Approach As with the earlier Joan Holtz cases‚ this one enables students to discuss some interesting issues‚ none of which requires a full class period. The instructor should be alert to newer situations to augment or supplant any of those described in the case. Also many of these issues tend eventually to result in an FASB‚ AICPA‚ or SEC pronouncement. Since seldom will a beginning student be aware of these pronouncements
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Case 6-4 1. All three methods do affect the net income - Deducted Purchased Goods: Will affect the cost of the good by decreasing it‚ which will affect the net income in the period the product is sold. - Other Income: Net Income would be higher than the other methods. - Not taken discount as expense: Cost of goods sold will be lower as discount will be counted‚ however it will decrease net income while being an expense. Overall‚ the cost of goods sold will be affected‚ therefore gross margin
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Joan Holtz CASE 5-3 JOAN HOLTZ (A)* (1) Electric utility bills. An electric utility company can estimate with reasonable certainty the expected revenue in a given period by taking into consideration some of the following: customer habits‚ average historical trends‚ demand and supply forecasts‚ and environmental changes. The electric utility industry effectively uses an insurance industry concept—the law of large numbers‚ to determine with certainty‚ expected revenue. The law of large numbers
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case study solution of joan holtz 5-4 These problems are intended to provide a basis for discussing questions aboutrevenue recognition that are not dealt with explicitly in the text and that are notsufficiently involved to warrant the construction of a regular case. Instructors can pick from among those listed. Some of them can be used as a take-off point for elaboration and extended discussion by adding “What if?” facts. Answers to Questions 1.If electricity usage tended to be fairly constant
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Joan Holtz (D)* 1. 2010 late-night talk show indicated the existence of an unclaimed municipal bond issued in 1883 by a town in Missouri. The bond was $100 with an interest rate on 10%. At a compound interest‚ what would be the bonds value in 2010. 2. (a) Joan read that a company issued eight-year‚ zero-coupon bonds at a price of 327 per 1‚000 par value. The question asked‚ was the yield on these bonds 15 percent‚ as Joan had calculated. Yes! (b) Assuming that bond discount amortization
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Accounting Case Study Solution Joan Holtz Case 7-2 The concerns raised by Joan Holtz in this problem are being addressed based on the Governing Principle of calculation of arriving cost of Fixed Asset. 1.) The cost of an item of Property‚ Plant‚ or Equipment‚ includes all expenditures that are necessary to make the Asset ready for its intended use. When a company constructs a building or item of equipment for its own use‚ the amount of capitalized cost includes all the costs incurred in construction
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$260‚000 Revenue would be booked once the service is rendered. If passengers cancel their reservations before the ship is off‚ revenue still has not yet booked. The difference would be made when the trip has taken off. 4. Accretion No revenue should be recognized in 2006. The goods have not been
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1. a) Architects’ fees: capitalized b) Snow removal costs: capitalized c) Cash discounts earned: capitalized d) The cost of building a combined construction office and toolshed: capitalized e) Interest on money borrowed to finance construction: capitalized f) Local real estate taxes: capitalized g) Cost of mistakes: expensed h) Overhead costs capitalized i) Insurance & non-covered by insurance costs: expensed 2. a) Firstly‚ we need to match its depreciation to revenue still being earned
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