Response to the following problem:
Our book distribution division sells to national bookstores. Our division allows for up to 25% of sales in returns. For the past 4 years, returns have averaged 20%. We record revenue based on revenue recognition when the right of return exists. Total Sales for 2012 $ 9,000,000, Sales Still Available for return for six months $ 2,000,000 ,Actual Returns on Sales not returnable 21%, 2011 Sales collected in 2012 $ 2,500,000 2011 Sales returned in 2012 19%
Required:
(a) We have studied several methods of revenue recognition.
Define and describe each of the following methods of revenue recognition, and indicate whether each is in accordance with generally accepted accounting principles. - Point of sale. - Completion-of-production. - Percentage-of-completion. - Installment-sales.
(b) Calculate the revenue to be recognized in fiscal year 2012 for each division of Patty Corporation in accordance with generally accepted accounting principles. Show all calculations .