1. Culver Inc. sells tickets for a Caribbean cruise on ShipAway Cruise Lines to Carmel Company employees. The total cruise package price to Carmel Company employees is $67,000. Culver Inc. receives a commission of 7% of the total price. Culver Inc. therefore remits $62,310 to ShipAway.Prepare the journal entry to record the remittance and revenue recognized by Culver Inc. on this transaction. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select ‘No entry’ for the account titles and enter 0 for the amounts.)Account Titles and ExplanationDebitCredit2. Windsor Corp. enters into a contract with a customer to build an apartment building for $1,046,900. The customer hopes to rent apartments at the beginning of the school year and provides a performance bonus of $148,500 to be paid if the building is ready for rental beginning August 1, 2018. The bonus is reduced by $49,500 each week that completion is delayed. Windsor commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:Completed byProbabilityAugust 1, 201870%August 8, 201820August 15, 20184After August 15, 20186(a) Determine the transaction price for the contract, assuming Windsor is only able to estimate whether the building can be completed by August 1, 2018, or not (Windsor estimates that there is a 70% chance that the building will be completed by August 1, 2018). (If answer is 0, please enter 0. Do not leave any fields blank.)Transaction Price$(b) Determine the transaction price for the contract, assuming Windsor has limited information with which to develop a reliable estimate of completion by the August 1, 2018, deadline. (If answer is 0, please enter 0. Do not leave any fields blank.)Transaction Price$3. Bonita Company sells goods to Windsor Company during 2017. It offers Windsor the following rebates based on total sales to Windsor. If total sales to Windsor are 10,500 units, it will grant a rebate of 3%. If it sells up to 18,600 units, it will grant a rebate of 4%. If it sells up to 29,200 units, it will grant a rebate of 7%. In the first quarter of the year, Bonita sells 10,400 units to Windsor at a sales price of $104,000. Bonita, based on past experience, has sold over 42,900 units to Windsor, and these sales normally take place in the third quarter of the year.What amount of revenue should Bonita report for the sale of the 10,400 units in the first quarter of the year.Revenue$4. Pharoah’s Agency sells an insurance policy offered by Capital Insurance Company for a commission of $96 on January 2, 2017. Pharoah will receive an additional commission of $11 each year for as long as the policyholder does not cancel the policy. After selling the policy, Pharoah does not have any remaining performance obligations. Based on Pharoah’s significant experience with these types of policies, it estimates that policyholders on average renew the policy for 4.5 years after the first year before terminating their insurance policy. It has no evidence to suggest that previous policyholder behavior will change.Determine the transaction price of the arrangement for Pharoah, assuming 100 policies are sold.Transaction price$Determine the revenue that Pharoah will recognize in 2017. (Round answer to 0 decimal places, e.g. 5,125.)Revenue$5.Sage Biotech enters into a licensing agreement with Pang Pharmaceutical for a drug under development. Sage will receive a payment of $10,000,000 if the drug receives regulatory approval. Based on prior experience in the drug-approval process, Sage determines it is 85% likely that the drug will gain approval and a 15% chance of denial.Determine the transaction price of the arrangement for Sage Biotech.Transaction price$Assuming that regulatory approval was granted on December 20, 2017, and that Sage received the payment from Pang on January 15, 2018, prepare the journal entries for Sage. The license meets the criteria for point-in-time revenue recognition. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select ‘No entry’ for the account titles and enter 0 for the amounts.)DateAccount Titles and ExplanationDebitCredit Dec. 20, 2017Jan. 15, 2018 Dec. 20, 2017Jan. 15, 20186. Whispering Company manufactures equipment. Whispering’s products range from simple automated machinery to complex systems containing numerous components. Unit selling prices range from $200,000 to $1,500,000 and are quoted inclusive of installation. The installation process does not involve changes to the features of the equipment and does not require proprietary information about the equipment in order for the installed equipment to perform to specifications. Whispering has the following arrangement with Winkerbean Inc.●Winkerbean purchases equipment from Whispering for a price of $1,040,000 and contracts with Whispering to install the equipment. Whispering charges the same price for the equipment irrespective of whether it does the installation or not. Using market data, Whispering determines installation service is estimated to have a standalone selling price of $51,000. The cost of the equipment is $620,000.●Winkerbean is obligated to pay Whispering the $1,040,000 upon the delivery and installation of the equipment.Whispering delivers the equipment on June 1, 2017, and completes the installation of the equipment on September 30, 2017. The equipment has a useful life of 10 years. Assume that the equipment and the installation are two distinct performance obligations which should be accounted for separately.Assuming Whispering does not have market data with which to determine the standalone selling price of the installation services. As a result, an expected cost plus margin approach is used. The cost of installation is $35,700; Whispering prices these services with a 20% margin relative to cost.(a)How should the transaction price of $1,040,000 be allocated among the service obligations? (Do not round intermediate calculations. Round final answers to 0 decimal places.)Equipment$Installation$7. Ivanhoe Ranch & Shamrock is a distributor of ranch and farm equipment. Its products range from small tools, power equipment for trench-digging and fencing, grain dryers, and barn winches. Most products are sold direct via its company catalog and Internet site. However, given some of its specialty products, select farm implement stores carry Ivanhoe’s products. Pricing and cost information on three of Ivanhoe’s most popular products are as follows.ItemStandaloneSelling Price (Cost)Mini-trencher$ 3,900($2,000)Power fence hole auger1,400(800)Grain/hay dryer13,400(11,800)Respond to the requirements related to the following independent revenue arrangements for Ivanhoe Ranch & Shamrock.On January 1, 2017, Ivanhoe sells 50 augers to Mills Farm & Fleet for $70,000. Mills signs a 6-month note at an annual interest rate of 12%. Ivanhoe allows Mills to return any auger that it cannot use within 50 days and receive a full refund. Based on prior experience, Ivanhoe estimates that 5% of units sold to customers like Mills will be returned (using the most likely outcome approach). Ivanhoe’s costs to recover the products will be immaterial, and the returned augers are expected to be resold at a profit. Prepare the journal entry for Ivanhoe on January 1, 2017. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select ‘No entry’ for the account titles and enter 0 for the amounts.)Account Titles and ExplanationDebitCredit(To record sales)(To record cost of goods sold)SHOW LIST OF ACCOUNTSLINK TO TEXTLINK TO TEXTLINK TO TEXTOn August 10, 2017, Ivanhoe sells 15 mini-trenchers to a farm co-op in western Minnesota. Ivanhoe provides a 4% volume discount on the mini-trenchers if the co-op has a 15% increase in purchases from Ivanhoe compared to the prior year. Given the slowdown in the farm economy, sales to the co-op have been flat, and it is highly uncertain that the benchmark will be met. Prepare the journal entry for Ivanhoe on August 10, 2017. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select ‘No entry’ for the account titles and enter 0 for the amounts. Round intermediate calculations to 6 decimal places, e.g. 1.246576 and final answers to 0 decimal places, e.g. 5,125.)Account Titles and ExplanationDebitCredit(To record sales)(To record cost of goods sold)SHOW LIST OF ACCOUNTSLINK TO TEXTLINK TO TEXTLINK TO TEXTIvanhoe sells three grain/hay dryers to a local farmer at a total contract price of $43,400. In addition to the dryers, Ivanhoe provides installation, which has a standalone selling price of $1,000 per unit installed. The contract payment also includes a $1,100 maintenance plan for the dryers for 3 years after installation. Ivanhoe signs the contract on June 20, 2017, and receives a 20% down payment from the farmer. The dryers are delivered and installed on October 1, 2017, and full payment is made to Ivanhoe. Prepare the journal entries for Ivanhoe in 2017 related to this arrangement. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select ‘No entry’ for the account titles and enter 0 for the amounts.)DateAccount Titles and ExplanationDebitCreditJun. 20, 2017 Jun. 20, 2017Oct. 1, 2017Dec. 31, 2017(To record payment received)(To record sales)(To record cost of goods sold) Jun. 20, 2017Oct. 1, 2017Dec. 31, 2017SHOW LIST OF ACCOUNTSLINK TO TEXTLINK TO TEXTLINK TO TEXTOn April 25, 2017, Ivanhoe ships 100 augers to Shamrock Depot, a farm supply dealer in Nebraska, on consignment. By June 30, 2017, Shamrock Depot has sold 50 of the consigned augers at the listed price of $1,400 per unit. Shamrock Depot notifies Ivanhoe of the sales, retains a 10% commission, and remits the cash due Ivanhoe. Prepare the journal entries for Ivanhoe and Shamrock Depot for the consignment arrangement. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select ‘No entry’ for the account titles and enter 0 for the amounts.)DateAccount Titles and ExplanationDebitCreditEntries for Ivanhoe Apr. 25, 2017Jun. 30, 2017Jun. 30, 2017(To record payment received)(To record sales)Entries for Shamrock Depot Apr. 25, 2017Jun. 30, 2017(To record consignment sales)(To record payment) Apr. 25, 2017Jun. 30, 2017

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