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BECKER: F2 question

f2 expense revenue exchange

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#1 cpastudent022

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Posted 06 September 2013 - 06:05 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 Mirunalini

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Posted 11 September 2013 - 02:28 PM

This is kind of barter system.Advertising is done.So the 10000 is revenue..



#3 astone

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Posted 12 September 2013 - 02:10 AM

06.30.XX - Entry to record advertising "sold"

DR AR (asset) - Hotel Co. owes us travel instead of money
CR Revenue - UVW sold advertising in exchange for travel

 

Entry to record travel expense
CR AR (asset) - Hotel Co. owes us travel instead of money
DR Expense - Hotel Co. consumes UVW travel & lodging
 



#4 bella.dreamer

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Posted 26 November 2013 - 02:53 AM


Hi,

 

UVW & Hotel Co agreed to exchange UVW's unused advertising time with lodging services provided by Hotel Co. As of June 30, commercial time worth of $10,000 was used by Hotel co. however Hotel co has not yet provided lodging services to UVW co. Therefore, UVW co has already earned that worth of $10,000 lodging services but has not been paid yet. The earning process has been complete because Hotel Co. has already used commercial time, therefore UVW has to recognize revenue of $10,000 regardless of whether they have used travel co services.

 

 

 

Hope it makes sense!!