Posted: May 1st, 2016

What is the purpose of electronics?

You are the Senior Accountant for the Patty Corporation which has several divisions. They each keep their own accounting books and have chosen the appropriate method of revenue recognition based on their operations.

Pat’s Electronics Division

Pat’s Electronics Division sells computers through agents in various cities. Agents send orders and down payments to our company. The division then ships the goods F.O.B. shipping point directly to the customers. Revenue is recognized at the point of sale.

Additional Financial Data:
Orders for fiscal year 2012 $ 3,000,000
Down Payments collected in 2012 $ 300,000
Billed and shipped in 2012 $ 2,400,000
Freight billed in 2012 $ 70,000
Commissions paid to Agents (after ship to customer) 10%
Warranty Returns as % of Sales 1%

Pickle Construction Division

The Pickle construction division was working on one project for the 2012 fiscal year. They use the percentage of completion revenue recognition method.

Contract for new administration building