Revenue Recognition Below Are Several Independent Situations That Occurred During

question 156

Essay

Revenue recognition Below are several independent situations that occurred during 2014 for Lark Corporation: Situation 1: Lark entered into a consignment arrangement with Sorel Corporation.Sorel will sell the goods and retain a commission. Situation 2: Lark agreed to provide consulting services to Dodo Company, a small company with a questionable credit rating.The term of the contract is 3 years. Situation 3: Lark sold equipment that includes a one-year warranty.The individual fair values of the equipment and warranty components are readily available. Instructions For each situation, explain how revenue should be recognized under the earnings approach.Be sure to include your reasoning.

---

Definitions:

Required Rate

The least yearly interest rate that persuades individuals or entities to dedicate capital to a distinct project or investment opportunity.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time. It's used in capital budgeting to assess the profitability of an investment or project.

Net Present Value

Net Present Value (NPV) is a financial metric that calculates the present value of all future cash flows of an investment, minus the initial investment cost.

Analyzing

The process of examining data, documents, or systems in detail in order to understand them better and make informed decisions.