Reference no: EM132468580

Question 1 - Determine revenue and expense recognition-earnings approach.

Howie, Price, and Liu operate an accounting firm. In March, their staff worked a total of 1,000 hours at an average billing rate of $250 per hour. They sent bills to clients in the month of March that totalled $150,000. They expect to bill the balance of their time in April. The firm's salary costs total $75,000 each month. How much revenue should the firm recognize in the month of March assuming the firm uses the earnings approach to revenue recognition? How much salaries expense should it recognize?

Question 2 - Determine revenue to be recognized-contract-based approach.

Mullen Manufacturing Ltd. sold $450,000 of merchandise on credit to customers in the month of September. During September, the company collected $250,000 cash from its customers. The company estimates that about 2% of the sales will be returned by customers. How much revenue should the company recognize for the month of September assuming Mullen uses the contract-based approach to revenue recognition?

Question 3 - Determine revenue and expense recognition-earnings approach.

Abbotsford Ltd., a sports equipment wholesaler, sold $350,000 of merchandise to a customer on November 14, 2017. The merchandise was shipped on November 29, 2017, FOB shipping point and was received by the customer on December 3, 2017. Full payment was received on November 30, 2017. The cost of the merchandise shipped was $200,000. Assuming Abbotsford Ltd. uses a perpetual inventory system and the earnings approach for revenue recognition, identify the critical event that will trigger revenue recognition. Prepare the journal entry to record revenue in November. What is the gross profit recognized in November?              

Question 5 - Determine revenue recognition, collection uncertain-earnings approach.

During December, Willow Appliance Company sold appliances to Ragnar Company for $25,000. Willow is unable to determine Ragnar's ability to pay the amount owing. Ragnar pays the full amount due in February of the following year. Willow uses the earnings approach to revenue recognition. Identify the critical event that will trigger revenue recognition. Prepare the journal entry to record the shipment of goods to Ragnar. The goods cost Willow $19,000 and Willow uses a perpetual inventory system.