1. List in summary form the FASBs 5-Step Revenue Recognition Model prescribed in ASC606.
| 1. List in summary form the FASBs 5-Step Revenue Recognition Model prescribed in ASC606. | ||||||||||||||||||||||||||
| 2. Given the following scenarios, can/should a firm recognize revenues? Yes or No, and why or why not? And discuss any journal entries required in each case. | ||||||||||||||||||||||||||
| Refer, when possible, to the FASBs 5-Step Revenue Recognition Model from Question 1. | ||||||||||||||||||||||||||
| a. The Craig Corporation delivers on consignment 100 new state-of-the-art J-Phones to a consignee; the consignee has the right to return any unsold J-Phones to Craig after 90 days. | ||||||||||||||||||||||||||
| Craig Corporation invoices the consignee $100 for each J-Phone upon delivery and the consignee immediately pays Craig Corporation upon delivery of the 100 J-Phones. | ||||||||||||||||||||||||||
| The consignee takes title to the J-Phones immediately upon delivery from Craig Corporation; the consignee maintains and pays for insurance on the J-Phones while they are in the consignee’s possession. | ||||||||||||||||||||||||||
| b. The Craig Corporation signs a contract with the Williams Corporation to provide them with various consulting services on an ad-hoc basis over the next 12 months. | ||||||||||||||||||||||||||
| Craig Corporation invoices Williams Corporation in advance $100,000 for these consulting services which are estimated at 500 hours at $200 per hour. | ||||||||||||||||||||||||||
| Williams Corporation pays Craig Corporation for this invoice within 30 days of invoicing. At the end of the 12 month period, both parties reconcile the consulting services | ||||||||||||||||||||||||||
| provided by Craig to Williams, and any overpayment is refunded at that time by Craig to Williams, or Craig invoices Williams for any services provided in excess of the original advance. | ||||||||||||||||||||||||||
| c. The Craig Corporation signs a contract with the Roberts Corporation and delivers to Roberts and invoices Roberts for 500 J-Phones at the price of $100 per J-Phone on December 31, 2016. | ||||||||||||||||||||||||||
| Craig Corporation also provides Roberts Corporation with a 90-day warranty for any defects any customers of Robert’s has with the J-Phones from the date of their purchase of the J-Phone | ||||||||||||||||||||||||||
| from Roberts. | ||||||||||||||||||||||||||
| d. Paul Jones, CPA, prepares the corporate income tax returns of a local furniture manufacturer for which Paul would normally have charged a client $5,000 to prepare. | ||||||||||||||||||||||||||
| The local furniture manufacturer pays Paul Jones by supplying his office with furniture with a normal retail selling of $6,000. The delivery of the tax returns by Paul and Paul’s | ||||||||||||||||||||||||||
| receipt of the furniture both take place on April 1, 2017. | ||||||||||||||||||||||||||
| How will Paul Jones record providing the tax return services and the receipt of the office furniture on April 1, 2017 on his books? | ||||||||||||||||||||||||||
| If the value of the furniture was not known (for example, it was discontinued furniture sitting in manufacturer’s warehouse from years ago), how would Paul record this transaction? | ||||||||||||||||||||||||||
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