Problem 9.1

In the following examples, indicate whether it was proper for X to record the particular amount of revenue according to accepted recognition principles (accrual system(. Your answer should be yes or No. give reasons for your answer.

1. X received a cheque for $500 from a customer in full payments for an item to be shipped DDP (Delivered Duty Paid) destination. The common carrier now has possession of the item. X recorded $500 as a revenue.

2. A customer purchased a television set from X for $600 and paid cash. However, since he was going to Europe, he asked X to deliver the television set next month. X immendiately recorded the $600 cash as revenue.

3. X sold a motor vehicle to Y for $10,000 in December. Y paid a deposit of $1,000 and agreed to pay the balance by monthly instalments beginning in Januari of the next accounting year. Ts kredit rating is good. X recorded $1,000 as revenue for the year ended 31 December.

4. X purchased a $10,000, 10 percent corporate debenture at par on 1 March of this year. Interest is paid every 1 March and 1 September. X received $500 cash interest on 1 September and recorded the $500 as total interest revenue for the year ended 31 December.

5. X operates a garage. He repaired Ys car for $600 last year. There is No reason to doubt Ys ability to pay. X received payment this year and recorded the payment of $600 as revenue this year.

6. X delivered $2,000 worth of merchandise on consigment to Y, the consignee. X recorded $2,000 as sales revenue.

7. X is a management consultant and was asked by Y to conduct a study on the feasinility of selling a new product, D. The study was not completed until 20 Januari year 10 but, at the end of year 9, X estimated that she had rendered $2,000 worth of services and recorded that amount as Service Revenue.