Exam 6: Reporting and Analyzing Revenues and Receivables

Channel stuffing arises when a company records a nonrecurring loss in a period of already depressed income.

Which of the below cases is not an example of potentially misleading reporting?

According to GAAP revenue recognition criteria, in order for revenue to be recognized on the income statement, an amount must be either realized, realizable, or earned.

Peter Gilgen & Co., (PG & Co.) reports the following footnote relating to its discontinued operations from its 2016 10-K annual report. Management's Discussion & Analysis Recent Developments: In May 2016, we completed the divestiture of our snacks business to The K Cereal Company. In accordance with the applicable accounting guidance for the disposal of long-lived assets, the results of our snacks business are presented as discontinued operations and, as such, have been excluded from continuing operations and from segment results for all periods presented. As a result of this change, the pet care business is now included in the Fabric Care and Home Care segment. A. What are discontinued operations? B. Describe the accounting treatment in the income statement according to GAAP for discontinued operations. C. How should the results of the operations of the discontinued segment be interpreted when evaluating the financial performance for PG & Co. for 2015 and 2016?

Discuss when each of the following types of businesses should likely recognize revenue: A. A large software company, such as Microsoft, when significant production, modification, or customization does not exist. B. A clothing retailer such as Abercrombie & Fitch.

Restructuring costs have two components: employee severance costs and extraordinary costs.

C-Market reports the following analysis of potential losses in its accounts receivable: The balance of Allowance for Uncollectible Accounts is $560 on December 31, 2016 prior to adjustments. A. Compute bad debt expense that will be recorded for 2016. B. What is the amount of accounts receivable to be reported on C-Market's December 31, 2016 balance sheet?

Following are the income statement accounts for a recent Tom's Computers income statement. Identify the items in Tom's Computers' statement that might be considered nonrecurring items.

A computer retailer has a 30-day return policy. The company can report revenue on the full amount as soon as the merchandise is sold if returns are immaterial.

Patrick Constructors entered into a $2,400,000 million contract to build a restaurant. Total estimated costs to complete the project are $1,800,000 million. The construction company incurred the following costs during the project: $720,000 in 2014; $270,000 in 2015; and $810,000 in 2016. Compute revenues, expenses, and income for each year 2014 through 2016 using the percentage-of-completion method.

Which of the following formula computes the average collection period?

At what amount will accounts receivable be reported on the balance sheet if the gross receivable balance is $94,000 and the allowance for uncollectible accounts is estimated at 8% of gross receivables?

GP3, Inc. estimated uncollectible accounts receivable at December 31, 2016 at $13,488, based on estimates on various ages of receivables and before learning of the bankruptcy of one of its customers. The customer owed $5,360, and the legal department has estimated costs to collect the balance owed by this customer at $8,000. The gross receivables balance on December 31, 2016 after write-offs is $337,200, and the allowance of uncollectible accounts balance was $14,480 at December 31, 2015. At December 12, 2016, the company wrote off $6,800 other accounts deemed uncollectible. A. How would the legal department advise GP3, Inc. to handle the collection of the $5,360? B. Draw a t-account for Allowance for Uncollectible Accounts and post all 2016 amounts to it, assuming that both the $6,800 and $5,360 have been written off. C. What is the effect of the $6,800 write off on gross and net accounts receivable?

Nickolas's Pizza intentionally overestimates the amount of its write-downs of assets in order to record a nonrecurring loss in a period of already depressed income. What is this behavior called?

Mathew's Marble contracts to lay marble in a new museum over a three-year period. The company's accountants record the following details relating to the project: Compute the amount of revenue, expense and income for each year using the percentage-of-completion method.

The Above & Beyond Books Company engages in the manufacture and sale of books worldwide. Its income statement for the year ending June 30, 2016 and selected amounts from its June 30, 2016 balance sheet follow: Assume the marginal tax rate is 35%. Determine the following for Above & Beyond Books for its year ending June 30, 2016: A. NOPAT B. RNOA C. NOPM D. Interpret the meaning of these three amounts as it applies to Above & Beyond Books.

On which financial statement and at what amount are accounts receivable reported?

Which of the following does not occur when a company receives additional information that requires it to increase its expectations of uncollectible accounts receivable?

Which of the following does not relate to improper revenue recognition?

Underestimating the allowance for uncollectible accounts can shift income from future periods into the present period.