Problem #: Revenues, Expenses, and Related Items points
Presented below are three scenarios that describe transactions involving revenues, expenses and cash flows.
The scenarios are followed by questions about the presentation of the transactions in the GAAP financial
statements. Write your answers to the questions in the spaces provided.
Scenario #: Ezra Industries points
On May Ezra Industries hired Mendes Marketing Solutions to provide advertising and other
marketing services for a monthly fee of $
Months
During Ezra Industries used the monthly services provided by Mendes Marketing Solutions from May
through December Ezra Industries paid cash of $ to Mendes Marketing Solutions during
Required:
Determine the amounts of the following items that Ezra Industries reported in its GAAP financial
statements relative to the service contract with Mendes Marketing Solutions. Indicate the statement in
which the item appeared by writing its reported amount in the corresponding box.
points per amount points
Amount
a
How much advertising expense, if any, was Ezra Industries required
to recognize in its GAAP income statement from its
arrangement with Mendes Marketing Solutions?
SUPPORTING COMPUTATION REQUIRED:
b
What amount, if any, was reported as prepaid advertising to Mendes
Marketing Solutions by Ezra Industries in its GAAP balance sheet at
December
c
What amount, if any, was reported as advertising payable to Mendes
Marketing Solutions by Ezra Industries in its GAAP balance sheet at
December
