Jump to content


Photo

BECKER F2: CPA2013-04680

F2 Question CPA2013-04680

  • Please log in to reply
3 replies to this topic

#1 cpastudent022

cpastudent022

    Newbie

  • CPAnet Member
  • Pip
  • 2 posts

Posted 04 September 2013 - 07:31 PM

I hope somebody can clarify why D is the correct answer - 

 

UVW Broadcast Co. entered into a contract to exchange unsold advertising time for travel and lodging services with Hotel Co. As of June 30, advertising commercials of $10,000 were used. However, travel and lodging services were not provided. How should UVW account for advertising in its June 30 financial statements?

         

 

d.

An asset and revenue for $10,000 is recognized.


I don't understand why the revenue is being recognized, because they had not received the travel/lodging services. I thought it is an expense because they just spent $10,000, in order to receive the travel/lodging services that was said in the contract. Thanks!


#2 kxmcpa

kxmcpa

    Newbie

  • CPAnet Member
  • Pip
  • 8 posts

Posted 11 September 2013 - 10:43 AM

travel and lodging services were  provided by Hotel Co., but not UVW Broadcast Co.

 

that was said that UVW Broadcast Co. sold  advertising time to Hotel Co. in the contract, So ,An asset and revenue should be recognized for $10,000 while advertising time was used for Hotel Co.'s commercials.

 

journal entry :

 

DR: cash  10000

 

CR:revenues 10000



#3 vvnrox87

vvnrox87

    Newbie

  • CPAnet Member
  • Pip
  • 1 posts

Posted 17 October 2013 - 05:16 AM

Wouldn't it be a receivable from Hotel Co., as no sale was actually made, therefore, no money was actually received...?

 

I would think entry would be as follows:

 

DR A/R - Hotel Co. $10k

CR Revenue (Advertising Income) $10k

 

So, the advertising service was provided, thus the revenue recognized, but the cash has/was not received. Therefore, a receivable sits. When cash is provided by Hotel Co to UVW Broadcast Co, the entry would be:

 

CR A/R - Hotel Co $10k

DR Cash $10k

 

OR

 

If the travel/lodging services were provided (instead of cash), the entry would be:

 

CR A/R - Hotel Co $10k

DR Travel-Lodging (expense acct) $10k

 

Would you agree?



#4 kxmcpa

kxmcpa

    Newbie

  • CPAnet Member
  • Pip
  • 8 posts

Posted 10 November 2013 - 01:20 PM

yes , you are right, I agree you.An asset (A/R) and revenue should be recognized for $10,000