| Author |
|
berry0331
Newbie
Joined: 04 Sep 2011
Online Status: Offline
Posts: 49
|
| Posted: 30 Apr 2012 at 20:11 | IP Logged
|
|
|
Question CPA-00616
Tara Co. owns an office building and leases the offices under a variety of
rental agreements involving rent paid in advance monthly or annually. Not
all tenants make timely payments of their rent. Tara's balance sheets
contained the following data:
Year 1
Rentals receivable $9,600
Unearned rentals 32,00 0
Year 2
Rentals receivable $12,400
Unearned rentals 24,000
During Year 2, Tara received $80,000 cash from tenants. What amount of
rental revenue should Tara record for Year 2?
a. $90,800 b. $85,200 c. $74,800 d. $69,200
The correct answer is a.
My approach to figure out rental revenue would be drawing a T account
of A/R.
On the debit side there's the beginning balance of 9,600 and the ending
balance of 12,400. The unearned rentals increase of 8,000 and the cash
collection of 80,000 will be on the credit side. The revenue would be a
plug on the left side of T account. So it is 9,600-revenue earned -
80,000- 8,000 = 12,400, Revenue=90,800
When I tried to do the following problem and did basically the same thing
it just doesn't work due to the unearned fee. The Becker answer says the
unearned fee is deducted from the cash collection so the net cash
collection will be 195,000 (200,000-5,000). What should I do if I see the
unearned revenue or fee? Are they the same thing?
Question CPA-00008
Ward, a consultant, keeps her accounting records on a cash basis. During
Year 2, Ward collected $200,000 in fees from clients. At December 31,
Year 1, Ward had accounts receivable of $40,000. At December 31, Year 2,
Ward had accounts receivable of $60,000, and unearned fees of $5,000.
On an accrual basis, what was Ward's service revenue for Year 2?
a. $175,000 b. $180,000 c. $215,000 d. $225,000
The correct answer is c.
|
| Back to Top |
|
| |
jhuang
Newbie
Joined: 06 Aug 2011
Location: United States
Online Status: Offline
Posts: 10
|
| Posted: 01 May 2012 at 04:11 | IP Logged
|
|
|
I think the main difference between the two problems is in the first problem, the T-account approach works because the $8,000 is the decrease in unearned revenue, whereas in the second problem the $5,000 is the ending unearned fees. For the second problem, it would be quicker to just calculate the total revenues by using the beginning and ending A/R, along with the cash collections in a T-account or the BASE equation as a first step, and then on an accrual basis the service revenue (earned) is simply the total revenue of $220,000 subtracted by the unearned fees of $5,000, yielding $215,000.
Although the true total revenue should be earned revenue that's reported on the income statement, while unearned revenue is a liability, the total revenue calculated above is the sum of the two, and is the sum of unearned revenue (cash only) and earned revenue (cash + credit sales).
|
| Back to Top |
|
| |
Wenlue
Newbie
Joined: 06 Nov 2011
Online Status: Offline
Posts: 2
|
| Posted: 01 May 2012 at 18:32 | IP Logged
|
|
|
Use BASE method for both questions
First Question:
Beginning Cash collection Y-2: 80,000
Addition: Rent receivable: 2,800
Subtract unearned revenue: -(8,000) *(-(-8000)=8000)
Ending balance: &nbs p; 74,800
Second Question:
Beginning cash collection Y-2: 200,000
Addition:A/R 20,000
Subtract unearned revenue: (5,000)
Ending balance: &nbs p; 215,000
Hope it helps :)
|
| Back to Top |
|
| |
berry0331
Newbie
Joined: 04 Sep 2011
Online Status: Offline
Posts: 49
|
| Posted: 01 May 2012 at 23:27 | IP Logged
|
|
|
Thanks guys! seems like base formula works better. I will use the base
formula when I see a question like these.
|
| Back to Top |
|
| |
MaxineM
Newbie
Joined: 03 May 2012
Online Status: Offline
Posts: 2
|
| Posted: 03 May 2012 at 06:57 | IP Logged
|
|
|
New jobs are good careers on the subject of Detroit and the U.S. auto industry. The Detroit Free Press reports that GM is bringing approximately 200 new careers to the insolvent city by joining up with local media-buying company Carat. Carat, which is owned by the London-headquartered Aegis Group, will open a brand new office on the 23rd floor of One Detroit Center on Woodward Avenue to be able to cement the partnership with GM. You can finance car with bad credit if you would like.I'm sure that there will be a lot of people who will be applying for these jobs.This is their opportunity to have a job that they want.
|
| Back to Top |
|
| |
|
|
Active Topics 
Memberlist 
Search 
Help
Register 
Login
Topic: Revenue
Topic Closed)
