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SOLUTIONS TO EXERCISES
EXERCISE 6-1 (20-25 minutes)
1. A service is being sold – Costco will provide the customer with access to the store and
merchandise for one year.
2. A combination of goods and services is being sold – DOT is providing goods and financing
services for one year.
3. A service is being sold – Toronto Blue Jays is providing entertainment services for April 1
through October.
4. A service is being sold – CIBC is providing financing services (a loan) for two years.
5. A service is being sold – Seneca is providing educational services for September to
December.
6. A good is being sold – Sears is providing the sweater.
7. A combination of goods and services is being sold – Hometown is providing goods and
warranty service.
8. A service is being sold - Premier Health Clubs is in business to provide health club facilities
and services to members.
(a) The journal entry to record the sale and related cost of goods sold are as follows.
(b)
Cash ................................................................. 610,000
Sales Discounts Forfeited ...................... 10,000
Accounts Receivable .............................. 600,000
(b)
2018
Contract Asset/Liability ($825,000 – $400,000) 425,000
Materials, Cash, Payables, etc. ............... 425,000
*$1,600,000 – $1,070,000
$640,000
(a) 2017: X $2,200,000 = $880,000
$640,000 + $960,000
To record revenues:
Contract Asset/Liability ................................. 880,000
Revenue from Long-Term Contracts ...... 880,000*
To record expenses:
Construction Expenses ................................. 640,000
Construction Asset/Liability ................... 640,000
*PROBLEM 6-9
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