Exercise NO: 23

Swift Corp., a capital goods manufacturing business that started on January 4, 2014, and operates on a calendar-year basis, uses the installmentsales

Swift Corp., a capital goods manufacturing business that started on January 4, 2014, and operates on a calendar-year basis, uses the installmentsales method of profit recognition in accounting for all its sales. The following data were taken from the 2014 and 2015 records. 2014 2015

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Installment sales $480,000 $620,000

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Gross profi t as a percent of costs 25% 28%

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Cash collections on sales of 2014 $130,000 $240,000

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Cash collections on sales of 2015 –0– $160,000

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The amounts given for cash collections exclude amounts collected for interest charges.

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Instructions

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(a) Compute the amount of realized gross profit to be recognized on the 2015 income statement, prepared using the installment-sales method. (Round percentages to three decimal places.)

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(b) State where the balance of Deferred Gross Profit would be reported on the financial statements for 2015.

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(c) Compute the amount of realized gross profit to be recognized on the income statement, prepared using the cost-recovery method.

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Snider Corporation, a publicly traded company, is preparing the interim financial data which it will issue to its shareholders at the end of the first

Snider Corporation, a publicly traded company, is preparing the interim financial data which it will issue to its shareholders at the end of the first quarter of the 2014–2015 fiscal year. Snider’s financial accounting department has compiled the following summarized revenue and expense data for the first quarter of the year. Sales revenue $60,000,000 Cost of goods sold 36,000,000 Variable selling expenses 1,000,000 Fixed selling expenses 3,000,000 Included in the fixed selling expenses was the single lump-sum payment of $2,000,000 for television advertisements for the entire year. Instructions (a) Snider Corporation must issue its quarterly financial statements in accordance with IFRS regarding interim financial reporting. (1) Explain whether Snider should report its operating results for the quarter as if the quarter were a separate reporting period in and of itself, or as if the quarter were an integral part of the annual reporting period. (2) State how the sales revenue, cost of goods sold, and fixed selling expenses would be reflected in Snider Corporation’s quarterly report prepared for the first quarter of the 2014–2015 fiscal year. Briefly justify your presentation. (b) What financial information, as a minimum, must Snider Corporation disclose to its shareholders in its quarterly reports?

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