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    ch18 Pertemuan Ke 2 Slide 2

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    fifi musfira
    The document discusses accounting for revenue recognition issues, including repurchase agreements, bill and hold arrangements, and other topics. It provides examples to illustrate how to apply the five-step process for revenue recognition to repurchase agreements and bill and hold transactions, including recording the initial sale, interest expense over time, and retirement of liabilities.

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    ch18 Pertemuan Ke 2 Slide 2

    Uploaded by

    fifi musfira
    131 views8 pages
    The document discusses accounting for revenue recognition issues, including repurchase agreements, bill and hold arrangements, and other topics. It provides examples to illustrate how to apply the five-step process for revenue recognition to repurchase agreements and bill and hold transactions, including recording the initial sale, interest expense over time, and retirement of liabilities.

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    The document discusses accounting for revenue recognition issues, including repurchase agreements, bill and hold arrangements, and other topics. It provides examples to illustrate how to apply the five-step process for revenue recognition to repurchase agreements and bill and hold transactions, including recording the initial sale, interest expense over time, and retirement of liabilities.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    131 views8 pages

    ch18 Pertemuan Ke 2 Slide 2

    Uploaded by

    fifi musfira
    The document discusses accounting for revenue recognition issues, including repurchase agreements, bill and hold arrangements, and other topics. It provides examples to illustrate how to apply the five-step process for revenue recognition to repurchase agreements and bill and hold transactions, including recording the initial sale, interest expense over time, and retirement of liabilities.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 8

    Prepared by

    Coby Harmon
    University of California, Santa Barbara
    Westmont College
    18-1
    LEARNING OBJECTIVE 3
    Accounting for Revenue Apply the five-step process to
    major revenue recognition
    Recognition Issues issues.

     Sales returns and allowances


     Repurchase agreements
     Bill and hold
     Principal-agent relationships
     Consignments
     Warranties
     Non-refundable upfront fees

    18-2 LO 3
    ILLUSTRATION 18.20
    Repurchase Agreements Recognition—Repurchase
    Agreement

    REPURCHASE AGREEMENT
    Facts: Morgan Ltd., an equipment dealer, sells equipment on January 1,
    2019, to Lane Company for £100,000. It agrees to repurchase this
    equipment (an unconditional obligation) on December 31, 2020, for a price
    of £121,000.

    Question: How should Morgan Inc. record this transaction?

    Assuming an interest rate of 10% is imputed from the agreement, Morgan


    makes the following entry to record the financing on January 1, 2019.

    Cash 100,000
    Liability to Lane Company 100,000

    18-3 LO 3
    ILLUSTRATION 18.22
    Repurchase Agreements Recognition—Repurchase
    Agreement

    Question: How should Morgan record this transaction?

    Morgan records interest on December 31, 2019, as follows.

    Interest Expense 10,000


    Liability to Lane Construction (£100,000 x 10%) 10,000

    Morgan records interest and retirement of its liability to Lane on December


    31, 2020, as follows.

    Interest Expense 11,000


    Liability to Lane Construction (£110,000 x 10%) 11,000

    Liability to Lane Construction 121,000


    Cash (£100,000 + £10,000 + £11,000) 121,000

    18-4 LO 3
    Bill-and-Hold Arrangements

     Contract under which an entity bills a customer for a


    product but the entity retains physical possession of
    the product until a point in time in the future.
     Result when buyer is not yet ready to take delivery but
    does take title and accepts billing.

    18-5 LO 3
    Bill-and-Hold Arrangements ILLUSTRATION 18.21
    Recognition—Bill and Hold

    BILL AND HOLD


    Facts: Butler A.Ş. sells ₺450,000 (cost ₺280,000) of fireplaces on March 1,
    2019, to a local coffee shop, Baristo, which is planning to expand its
    locations around the city. Under the agreement, Baristo asks Butler to retain
    these fireplaces in its warehouses until the new coffee shops that will house
    the fireplaces are ready. Title passes to Baristo at the time the agreement is
    signed.

    Question: When should Butler recognize the revenue from this


    bill-and-hold arrangement?

    Butler determines when it has satisfied its performance obligation to transfer


    a product by evaluating when Baristo obtains control of that product.

    18-6 LO 3
    Bill-and-Hold Arrangements ILLUSTRATION 18.23
    Recognition—Bill and Hold

    Question: When should Butler recognize the revenue from this


    bill-and-hold arrangement?

    For Baristo to have obtained control of a product in a bill-and-hold


    arrangement, all of the following criteria should be met:
    (a) The reason for the bill-and-hold arrangement must be substantive.
    (b) The product must be identified separately as belonging to Baristo.
    (c) The product currently must be ready for physical transfer to Baristo.
    (d) Butler cannot have the ability to use the product or to direct it to another
    customer.

    In this case, it appears that the above criteria were met, and therefore
    revenue recognition should be permitted at the time the contract is signed.

    18-7 LO 3
    Bill-and-Hold Arrangements ILLUSTRATION 18.23
    Recognition—Bill and Hold

    Question: When should Butler recognize the revenue from this


    bill-and-hold arrangement?

    March 1, 2019
    Butler makes the following entries to record the bill-and-hold sale and
    related cost of goods sold.
    Accounts receivable 450,000
    Sales Revenue 450,000
    Cost of Goods Sold 280,000
    Inventory 280,000

    18-8 LO 3

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