Recognition problems:
26. On October 1, year 1, Acme Fuel Co. sold 100,000 gallons
of heating oil to Karn Co. at $3 per gallon. Fifty thousand gallons
were delivered on December 15, year 1, and the remaining
50,000 gallons were delivered on January 15, year 2. Payment
terms were: 50% due on October 1, year 1, 25% due on first
delivery, and the remaining 25% due on second delivery. What
amount of revenue should Acme recognize from this sale during
year 1?
a. $ 75,000
b. $150,000
c. $225,000
d. $300,000
27. Amar Farms produced 300,000 pounds of cotton during the
year 1 season. Amar sells all of its cotton to Brye Co., which has
agreed to purchase Amar’s entire production at the prevailing
market price. Recent legislation assures that the market price will
not fall below $.70 per pound during the next two years. Amar’s
costs of selling and distributing the cotton are immaterial and can
be reasonably estimated. Amar reports its inventory at expected
exit value. During year 1, Amar sold and delivered to Brye
200,000 pounds at the market price of $.70. Amar sold the remaining
100,000 pounds during year 2 at the market price of
$.72. What amount of revenue should Amar recognize in year 1?
a. $140,000
b. $144,000
c. $210,000
d. $216,000
Why is #26 b if #27 is c?
AUD: 84
REG: 84
BEC: 79
FAR: 83
.