Question

Ben teaches golf lessons at a country club under a business called Ben's Pure Swings (BPS). He operates this business as a sole proprietorship on the accrual basis of accounting. This year BPS billed clients for $96,700 and collected $61,000 in cash for golf lessons completed during the year. In addition, BPS collected an additional $14,500 in cash for lessons that will commence after year end. Ben hopes to collect about half of the outstanding billings next year but the rest will likely be written off. Besides providing private golf lessons, BPS also contracted with the country club to staff the driving range. This year BPS billed the country club $27,200 for the service. The club paid $16,000 of the amount but disputed the remainder. By year end the dispute had not been resolved, and while Ben believes he is entitled to the money, he has still not collected the remaining $11,200. What is the amount of revenue recognized by BPS? (Excel spreadsheet template provided)

Answer 1

1. Revenue Recognized by BPS

On the basis of Accrual Accounting, amount recognition will be the amount pertaining to the service rendered.

which is,

Billing for Golf Lessons = $96,700 ------ A

Billing for Staff for Driving Range = $27,200 ------ B

Total Revenue = A + B = $123,900

2. Deductions claimed by BPS

Bad Debt Expense = $12,580

Advertisement = $12,150

Pro Golf Teachers Membership Fees = $860

Supplies = $4720

Club Rental = $5800 ($100 for 10 weeks which is $1000 is for next year)

Insurance = $600 (Ben paid only $600 for this year)

Accounting Fees = $7820

Total Deductions = $44,530