1) My understanding would be that Revenue should be recognised
during the YE 31/12/2010 on the basis that the ownership of the
goods has already been transferred upon the date of transaction.
Delivery date and date of payment do not equate to date of
transaction. In this regard, I believe that the CEO's journal
entries are correct. In addition, I would think that inventory
would have to be credited and COGS to be debited accordingly.
2) From the question, it seems to be saying that the advertising
expense is to last for 1 year. Since, it was paid in July 2010, so
for the YE 31/12/2010, the half of the expense should be
recognised. The other half is to be recognised for the 2011 year
end.
