The $25 Referral Credit represents the fair value of the cost Runway would pay to acquire a new customer from an unrelated third party or marketing firm who is not a purchaser of its products. The program is open to all of Runway’s customers and does not need to be combined with any initial or existing purchases. Required: 1. How should the $25 Referral Credit be recorded in Runway’s Income Statement — as a reduction of revenue or as a marketing expense? 2.
In accordance to ASC 805-20-25-1, Shakespeare should recognize $2 million of current assets, $5 million of the identifiable noncurrent assets acquired, $2 million of intangible assets, and $1million of goodwill at March 10, 2011, the acquisition date. ASC 805-20-25-6 requires Shakespeare to classify or designate, at the acquisition date, the identifiable assets acquired and liabilities assumed as necessary to subsequently apply other GAAP. The company should make those classifications or designations on the basis of the contractual terms, economic conditions, its operating or accounting policies, and other pertinent conditions as they exist at the acquisition date. 4. If Shakespeare were an SEC filer, ASC 805-10-50-2(h) requires Shakespeare to disclose pro forma information for business combinations that occurred in the current reporting period.
1. At what point, if ever, did the parties have a contract? “One generally accepted definition of a contract is a promise or a set of promises enforceable by law” (Melvin, 2011, p. 194). In this scenario, Big Time Toymaker entered into an option contract with Chou. “BTT was interested in distributing Strat and entered into an agreement with Chou whereby BTT paid him $25,000 in exchange for exclusive negotiation rights for a 90-day period” (Melvin, 2011, p. 155).
Question: (TCO4) When the LIFO method is used, cost of goods sold is assumed to consist of: Your Answer: Instructor Explanation: LIFO means last in, first out, so the last units purchased are sold and the remaining units are assumed to consist of the first units. Points Received: 0 of 5 Comments: 4. Question: (TCO4) Given the following data, calculate the gross profit using the average-cost method, if the selling price was $20 per unit. Date, Item, Unit 1/1, Beginning inventory, 40 units at $12 per unit 3/5, Purchase of inventory, 18 units at $14 per unit 5/30, Purchase of inventory, 24 units at $18 per unit 12/31, Ending inventory, 20 unites Your Answer: Instructor Explanation: Units available for sale (40+18+24) =82, less ending inventory of 20 units tells us that 62 units were sold. To determine the average cost per unit, we need the value of the total units available for sale, (40*$12) +(18$14) +(24$18) =$1,164.
Case 13-1: Refer-a-Friend Program Runway Discount is an online retailer that sells discounted high-end fashion. The company decided to create the Refer-a-Friend Program where a current customer can refer a friend to the website. Once the new customer purchases merchandise, the existing customer will receive a $25 credit towards their next purchase. The $25 credit represents the fair value of the cost Runway would pay to earn a new customer from an unrelated third party or marketing firm. Runway Discount should record the $25 Referral Credit as a marketing expense.
C. accounting profits produced. D. increase in total sales produced. 3. Assume your firm has an unused machine that originally cost $75,000, has a book value of $20,000, and is currently worth $25,000. Ignoring taxes, the correct opportunity cost for this machine in capital budgeting decisions is: A.
Also it allowed its users to link their facebook and twitter accounts to Cork’d profiles. For wineries, it provided option of maintaining profile pages, where they could post information, provide links to their own websites and interact directly with their fans. Individual accounts were free, and there were charged no premium features on the website. However, winery account required a $999 annual fee, and in turn, wineries were identified as verified. Cork’d was an ad-free site, so that users can have the best possible experience.
Revenue model Amazon.com is primarily a retail site with a sales revenue model. Amazon makes its money by taking a small percentage of the sale price of each item that is sold through its website. Amazon also allows companies to advertise their products by paying to be listed as featured products. 3. Market opportunity The company is now increasingly cashing in on its credentials as an online retail pioneer by selling its expertise to major store groups.
(n.d.). The cash method recognizes revenue on a cash basis only. This means that neither the revenue nor the expenses are acknowledged until after the cash is received. This is great for small businesses but is not very logical for large business. Large companies
Pro – Business doesn’t have to pay taxes. Pro – Business doesn’t have to pay for healthcare. Pro – Business doesn’t have to contend with OSHA. Pro – Upper class Americans can save money on maids, lawn care, etc. Con – America loses money on taxes.