Pat\'s Electronics Division sells computers through agents in various cities. Ag
ID: 2368103 • Letter: P
Question
Pat's Electronics Division sells computers through agents in various cities. Agents send orders and down payments to our company. The division then ships the goods F.O.B. shipping point directly to the customers. Revenue is recognized at the point of sale. Additional Financial Data: Orders for fiscal year 2012 $ 3,000,000 Down Payments collected in 2012 $ 300,000 Billed and shipped in 2012 $ 2,400,000 Freight billed in 2012 $ 70,000 Commissions paid to Agents (after ship to customer) 10% Warranty Returns as % of Sales 1% Please Calculate the revenue to be recognized in fiscal year 2012 for each division of Patty Corporation in accordance with generally accepted accounting principles. Show ALL CALCULATIONS!!Explanation / Answer
Revenue for 2012 $ 2,400,000 Notes: Revenue is the amount of goods shipped actually billed and shipped when revenue is recognized at the point of sale (F.O.B. shipping point). Orders and down payments are not Sales. Actual freight costs are expenses made by the seller that will be reimbursed by the buyer at the time of payment and are not revenue. Commissions and warranty returns are selling expenses and will be part of the income statement as operating expenses.