Joan Holtz
Essay by 24 • April 27, 2011 • 562 Words (3 Pages) • 1,738 Views
Case 5-3 Joan Holtz
1. If electricity usage tended to be fairly constant from month to month, the unreported usage in December would be reported in January, and overall revenues for this year would be materially correct.
2. I might be counted in few different ways. First, at the balance sheet it might be counted as $10 000 account payable and $10 000 account receivable (counting the whole amount as (revenue in 2001 on the grounds that it is in hand and that any specific services are undefined and/or separately billable). The other option is to take the more conservative approach of counting only $5,000 (or other percentage of $10 000) as revenue in 2001 on the grounds that the service involved.
3. If the cruise happens in 2002, its profit of $20 000 will be counted as a revenue in 2001.
4. This is an opportunity cost issue. If the nursery owner decides to keep trees growing for one more year, his revenue might be higher. In that way, he will not report any revenue in 2001. However, there is no guarantee that the trees could be sold for more than $4 in 2002 (market prices may decrease, or fire may destroy them).
5. If a professional service firm values its jobs in progress at billing rates, then it is recognizing revenue as the work is performed (time applied to projects) rather than waiting until the customer is billed. In fact, many such firms feel that even with fixed-fee contracts, the critical performance task is spending time on a project as opposed to delivering some end item to the client; they thus record jobs in progress at estimated fee, which would be the same as billing rates for the time applied provided the project is within its professional-hour budget. Of course, whether the revenue is recognized when the time is applied or when the client is billed does make a difference in owners' equity. Retained earnings will reflect the margin on the time applied sooner if the jobs in progress inventory is valued at billing rates rather than at cost.
6. I think that the coupon has nothing to do with the sale of coffee. Its purpose is to promote the sale of tea. The 60 cent reimbursements made in 2001 and the 60 cent reimbursements made in 2002 are an expense of selling tea in 2002.
7. The
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