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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ACCT101 project Case5-3 1. Electric utility bills Method 1: As everyone knows‚ the electricity meters can be read every month. Therefore‚ in December the company will know the electricity usage of the former 12 months including that of December last year. And the usage of electricity in December this year can be included in the next year’s revenue. Method 2: Strictly speaking‚ the revenue recognized in method 1 is not earned in THIS YEAR. through the method of estimating the electricity usage
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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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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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From Case 5-3‚ I chose number 3‚ Cruise. Raymond’s‚ a travel agency‚ chartered a cruise ship for two weeks beginning January 23‚ 2007‚ for $200‚000. In return‚ the ship’s owner agreed to pay all costs of the cruise. In 2006‚ Raymond’s sold all available space on the ship for $260‚000. It incurred $40‚000 in selling and other costs in doing so. All the $260‚000 was received in cash from passengers in 2006. Raymond’s paid $50‚000 as an advance payment to the ship owner in 2006. How much‚ if any‚ of
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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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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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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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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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