is complete and title of the aircraft is transferred. The average cost of these aircraft ent of each airplane's purchase price is withheld by the is approximately $350-$500 million. On what basis should Boeing recognize the revenues for these planes? Ethics and the Tone at the Top. Discuss what is meant by the tone at the top and why it is important, Further, discuss whether you feel it is ethical to be a whistle-blower. Assignments with the logo in the margin are available in a Coune. See the Preface of the book for details. CHECK FIGURE indicates that check figures are available on the book's website. KERCISES 2 TA Revenue Recognition Policy Decisions. Consider the following independent situations: 1. An international health club sells lifetime memberships costing S1,500 which allow the purchaser unlim ited use of any of the club's 300 facilities around the world. The initiation fee may be paid in 36 monthly installments, with a two percent interest charge on any unpaid balance. 2. Franklin Motors, Inc., has always offered a limited, 36-month warranty on its cars and trucks, but to counter the significant competition in the industry, the company has come to the conclusion that it must do something more. With that in mind, the company developed a new warranty program: For a $1,500 payment at the time of purchase, a customer can buy a seven-year warranty that will cover replacement of almost all parts and labor. The purchased warranty expires at the end of seven years or when the customer sells the vehicle, whichever occurs first. 3. Chandler Promotions Inc. sells coupon books that give the holder a ten percent discount at any of 50 participating merchants. The buyer of the coupon book pays $25 for the book but can realize up to $500 in savings. Chandler convinces merchants to participate in the program at no cost, arguing that participation will build customer traffic and will create the opportunity for repeat business from the coupon book-holders. 4. Comfort Furniture sells household furniture. Customers can pay for the furniture at the time of delivery or they can wait one year to make payment. In the latter case, the customer must pay for the retail price of the furniture plus an additional 16 percent. If the customer decides to pay after one year, should Comfort Furniture report the additional 16 percent as part of the revenue from selling the fumiture or should it be reported separately? Assume that the ability to collect the receivable is not an issue. 5. Local News, Inc., prints and distributes a weekly newspaper throughout the city. Local stores order a certain number of the papers each week and pay for them on delivery. Local News always takes back any unsold papers and gives the merchant a credit toward future purchases. For each of these situations, describe the revenue recognition policy that you believe that the company should follow, explaining the basis for your recommendation. Revenue Recognition. The Harris Corporation contracted with The Coates Company to manufacture various metal component parts that would be assembled by Harris before resale to Harris's customers. Harris placed its most recent order with Coates for 10,000 parts in December 2019. Because of existing work com- mitments, however, Coates indicated that work on the Harris order could not commence until January 2020, with an expected delivery date of February 2020. Coates provides its customers with trade credit terms of 2/10, un/30, and thus, didn't expect to be paid the contract price of $100,000 by Harris until March 2020. In which month should Coates Company recognize the $100,000 in revenue from the Harris order? Why Analyzing Accounts Receivable. The following information is taken from the annual report of The Douglas Electric Company Current Year Prior Year Balance Sheet Amounts receivable, net of the allowance for uncollectible $87,800 $84,500 is complete and title of the aircraft is transferred. The average cost of these aircraft ent of each airplane's purchase price is withheld by the is approximately $350-$500 million. On what basis should Boeing recognize the revenues for these planes? Ethics and the Tone at the Top. Discuss what is meant by the tone at the top and why it is important, Further, discuss whether you feel it is ethical to be a whistle-blower. Assignments with the logo in the margin are available in a Coune. See the Preface of the book for details. CHECK FIGURE indicates that check figures are available on the book's website. KERCISES 2 TA Revenue Recognition Policy Decisions. Consider the following independent situations: 1. An international health club sells lifetime memberships costing S1,500 which allow the purchaser unlim ited use of any of the club's 300 facilities around the world. The initiation fee may be paid in 36 monthly installments, with a two percent interest charge on any unpaid balance. 2. Franklin Motors, Inc., has always offered a limited, 36-month warranty on its cars and trucks, but to counter the significant competition in the industry, the company has come to the conclusion that it must do something more. With that in mind, the company developed a new warranty program: For a $1,500 payment at the time of purchase, a customer can buy a seven-year warranty that will cover replacement of almost all parts and labor. The purchased warranty expires at the end of seven years or when the customer sells the vehicle, whichever occurs first. 3. Chandler Promotions Inc. sells coupon books that give the holder a ten percent discount at any of 50 participating merchants. The buyer of the coupon book pays $25 for the book but can realize up to $500 in savings. Chandler convinces merchants to participate in the program at no cost, arguing that participation will build customer traffic and will create the opportunity for repeat business from the coupon book-holders. 4. Comfort Furniture sells household furniture. Customers can pay for the furniture at the time of delivery or they can wait one year to make payment. In the latter case, the customer must pay for the retail price of the furniture plus an additional 16 percent. If the customer decides to pay after one year, should Comfort Furniture report the additional 16 percent as part of the revenue from selling the fumiture or should it be reported separately? Assume that the ability to collect the receivable is not an issue. 5. Local News, Inc., prints and distributes a weekly newspaper throughout the city. Local stores order a certain number of the papers each week and pay for them on delivery. Local News always takes back any unsold papers and gives the merchant a credit toward future purchases. For each of these situations, describe the revenue recognition policy that you believe that the company should follow, explaining the basis for your recommendation. Revenue Recognition. The Harris Corporation contracted with The Coates Company to manufacture various metal component parts that would be assembled by Harris before resale to Harris's customers. Harris placed its most recent order with Coates for 10,000 parts in December 2019. Because of existing work com- mitments, however, Coates indicated that work on the Harris order could not commence until January 2020, with an expected delivery date of February 2020. Coates provides its customers with trade credit terms of 2/10, un/30, and thus, didn't expect to be paid the contract price of $100,000 by Harris until March 2020. In which month should Coates Company recognize the $100,000 in revenue from the Harris order? Why Analyzing Accounts Receivable. The following information is taken from the annual report of The Douglas Electric Company Current Year Prior Year Balance Sheet Amounts receivable, net of the allowance for uncollectible $87,800 $84,500