Reference no: EM132497664

Question 1: Thunder Corp makes an equity investment costing $65,000 and classifies it as non-trading.

At December 31, the fair value of the invested is $ 62,000.

Instructions: Prepare the adjusting entries to report the investment. Indicate the statement (report) presentation of the account in your entry.

Question 2: Here is the following revenue recognition situation.

a. Wage Inc. sells goods to Rajab Corp for $850,000, payment due at delivery. b. Wage Inc. sells goods on account to Suro Corp for $1,050,000, payment due in 30 days.

c. Wage Inc. sells goods to Syawal Corp for $480,000, payment due on two installments. The first installment payable in 14 months, and the second payment due 4 months later. The present value of the future payment is $445,000.

Instructions: Indicate the transaction price for each of these situations and when revenue will be recognized.

Question 3: Please analyze each of these situations carefully.

a. Roda Company dealership sells both new and used car. Some of the cars are used for demonstration purposes; after 6 months, these cars are then sold as used vehicle. Should Roda Company record these sales of used car as revenue or gain?

b. One of the main indicators of whether control has passed to the customer is whether revenue has been earned. Is this statement correct?

c. One of the five steps in determining whether revenue should be recognized is whether the sale has been realized. Do you agree? Explain your reason.

d. On of the criteria that contracts must meet to apply the revenue standard is collectability of the sales price must be reasonably possible. Is it correct?

e. Many believe that distinction between revenue and gains is important in the financial statements. Given that both revenue and gains increase net income, why is the distinction important?