Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Intermediate Accounting. B Question One--Expected Value Method Ariel Advertising Inc. signed a six-month advertising contract with Gepetto Toys on May 1st, 2020. Under the terms

Intermediate Accounting. image text in transcribed
image text in transcribed
image text in transcribed
B Question One--Expected Value Method Ariel Advertising Inc. signed a six-month advertising contract with Gepetto Toys on May 1st, 2020. Under the terms of this contract, Gepetto transferred payment in full of $12,000 at the the time the contract was signed and Ariel Advertising agreed to publish print advertisements in a monthly periodical for the next half year. A clause in this contract states that Gepetto will transfer an additional $6,000 bonus to Ariel Advertising if the Gepetto's sales have increased by 20% over the six month period. Ariel's actuary's have looked at Gepetto's financials and done research for Gepetto's target market and believe there is only a 20% chance of Gepetto's sales increasing by 20%. Ariel Advertising Inc. mill record 2 revenues on this contract using the expected value method. 3 Part One 4 Determine the expected consideration using the expected value method. Expected Scenario Possible Price 5 Probability Consideration Gepetto's sales 6 increase by 20% Gepetto's sales do not increase 7 by 20% 8 Expected value at contract's signing 9 Part Two Record Ariel Advertising, Inc.'s May 1st receipt of $12,000 in advance for future services 10 owed to Gepetto Toys. 11 12 13 14 15 Part Three Record the May 31st journal entry to recognize one month's worth of earned revenue on 16 this six-month contract. Expected Value Soty Digits Patent Income Statement 15 Part Three Record the May 31st journal entry to recognize one month's worth of earned revenue on 16 this six-month contract. 17 18 19 20 21 Part Four On June 1st, Gepetto released their May sales numbers to Ariel Advertising and sales revenues grew steadily during the month thank to the additional advertising that Ariel providing. Ariel Advertising's actuarial staff now believes the company's likelihood of receiving the $6,000 bonus has increased to 40%. Compute the new expected value of this 22 contract based upon the revised estimate. Expected 23 Scenario Possible Price Probability Consideration Gepetto's sales 24 increase by 20% 40% Gepetto's sales do not increase 60% 25 by 20% 26 New Expected Contract Value 27 Part Five Record Ariel Advertising's June 1st journal entry to adjust the amount of revenues and bonus 28 receivable the company placed on the books at the end of May. 29 New Expected Bonus Value 30 Monthly Bonus Recognition 31 Amount of Bonus Recognized (new) 32 Adjustment to Bonus Receivable 33 Bonus Receivable (A+) 34 1-Jun Service Revenue (R+) 35 Expected Value Soty Digits Patent Income Statement Ready 7 Part Five Record Ariel Advertising's June 1st journal entry to adjust the amount of revenues and bonus 3 receivable the company placed on the books at the end of May. 9 New Expected Bonus Value -0 Monthly Bonus Recognition 1 Amount of Bonus Recognized (new) 52 Adjustment to Bonus Receivable 33 Bonus Receivable (A+) 34 1-Jun Service Revenue (R+) 35 36 Adjusted prior revenue from Gepetto Contract 37 Part Six Record Ariel Advertising's June 30th journal entry to recognize June's revenues related to 38 Gepetto contract under this new revised estimate. 39 Unearned Revenue (L-) 40 Bonus Receivable (A+) 41 30-Jun Service Revenue (R+) 42 Recognized December revenues on J-Mart contract 43 Part Seven During the second quarter of the 20XX, Ariel Advertising recognized a total of $195,200 in service revenue on other contracts besides the Gepetto contract. Determine the balance of the firm's service revenue account (including the Gepetto contract) that it will report on its 44 10-Q for the second quarter of 20XX. 45 Non-Gepetto Service Revenue Recorded Add: Service Revenue from Gepetto 47 Quarter end Balance of Service Revenue 48 49 50 51 46 52 53 Expected Value Soty Digits Patent Income Statement Ready B Question One--Expected Value Method Ariel Advertising Inc. signed a six-month advertising contract with Gepetto Toys on May 1st, 2020. Under the terms of this contract, Gepetto transferred payment in full of $12,000 at the the time the contract was signed and Ariel Advertising agreed to publish print advertisements in a monthly periodical for the next half year. A clause in this contract states that Gepetto will transfer an additional $6,000 bonus to Ariel Advertising if the Gepetto's sales have increased by 20% over the six month period. Ariel's actuary's have looked at Gepetto's financials and done research for Gepetto's target market and believe there is only a 20% chance of Gepetto's sales increasing by 20%. Ariel Advertising Inc. mill record 2 revenues on this contract using the expected value method. 3 Part One 4 Determine the expected consideration using the expected value method. Expected Scenario Possible Price 5 Probability Consideration Gepetto's sales 6 increase by 20% Gepetto's sales do not increase 7 by 20% 8 Expected value at contract's signing 9 Part Two Record Ariel Advertising, Inc.'s May 1st receipt of $12,000 in advance for future services 10 owed to Gepetto Toys. 11 12 13 14 15 Part Three Record the May 31st journal entry to recognize one month's worth of earned revenue on 16 this six-month contract. Expected Value Soty Digits Patent Income Statement 15 Part Three Record the May 31st journal entry to recognize one month's worth of earned revenue on 16 this six-month contract. 17 18 19 20 21 Part Four On June 1st, Gepetto released their May sales numbers to Ariel Advertising and sales revenues grew steadily during the month thank to the additional advertising that Ariel providing. Ariel Advertising's actuarial staff now believes the company's likelihood of receiving the $6,000 bonus has increased to 40%. Compute the new expected value of this 22 contract based upon the revised estimate. Expected 23 Scenario Possible Price Probability Consideration Gepetto's sales 24 increase by 20% 40% Gepetto's sales do not increase 60% 25 by 20% 26 New Expected Contract Value 27 Part Five Record Ariel Advertising's June 1st journal entry to adjust the amount of revenues and bonus 28 receivable the company placed on the books at the end of May. 29 New Expected Bonus Value 30 Monthly Bonus Recognition 31 Amount of Bonus Recognized (new) 32 Adjustment to Bonus Receivable 33 Bonus Receivable (A+) 34 1-Jun Service Revenue (R+) 35 Expected Value Soty Digits Patent Income Statement Ready 7 Part Five Record Ariel Advertising's June 1st journal entry to adjust the amount of revenues and bonus 3 receivable the company placed on the books at the end of May. 9 New Expected Bonus Value -0 Monthly Bonus Recognition 1 Amount of Bonus Recognized (new) 52 Adjustment to Bonus Receivable 33 Bonus Receivable (A+) 34 1-Jun Service Revenue (R+) 35 36 Adjusted prior revenue from Gepetto Contract 37 Part Six Record Ariel Advertising's June 30th journal entry to recognize June's revenues related to 38 Gepetto contract under this new revised estimate. 39 Unearned Revenue (L-) 40 Bonus Receivable (A+) 41 30-Jun Service Revenue (R+) 42 Recognized December revenues on J-Mart contract 43 Part Seven During the second quarter of the 20XX, Ariel Advertising recognized a total of $195,200 in service revenue on other contracts besides the Gepetto contract. Determine the balance of the firm's service revenue account (including the Gepetto contract) that it will report on its 44 10-Q for the second quarter of 20XX. 45 Non-Gepetto Service Revenue Recorded Add: Service Revenue from Gepetto 47 Quarter end Balance of Service Revenue 48 49 50 51 46 52 53 Expected Value Soty Digits Patent Income Statement Ready

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Nessus Network Auditing

Authors: Russ Rogers

2nd Edition

1597492086, 978-1597492089

More Books

Students also viewed these Accounting questions