Unearned memberships, gift card breakage, embedded sales tax and a refinanced note each get a year-end figure in AC301's Unit 2 current liability problem for a composite climbing gym chain. Searches like "ac 301 unit 2 assignment example", "ac301 unit 2 sample" and "ac301 unit 2 example" land here.
What a finished AC301 Unit 2 current liability problem looks like
Five short blocks, each ending on the year-end balance and the entry that produces it. Memberships come first: 400 annual passes sold on October 1 at 600 dollars each for 240,000, of which three months, 60,000, are earned by December 31 and 180,000 remain unearned. Gift cards follow: 30,000 sold, 18,000 redeemed, and breakage expected at 10 percent, recognized in proportion to redemptions, so 20,000 of revenue and a 10,000 liability. Sales tax is extracted from register receipts of 53,500 that include a 7 percent rate, leaving 50,000 of sales and 3,500 payable. Vacation earned but untaken by twelve staff, five eight-hour days each at 20 dollars an hour, accrues 9,600. The final block keeps a 300,000 bank note due in April out of current liabilities because a five-year refinancing was signed before issuance.
How a AC301 Unit 2 example is structured
The blocks run from the most routine obligation to the one that needs a judgment, so the classification question arrives after the measurement questions are settled. Memberships lead because they show the basic idea of unearned revenue: money collected before the climbing time is provided remains owed as service. Gift cards add a wrinkle, since breakage is recognized as the pattern of redemptions unfolds, not all at once and not never, and the sample shows the proportion of 18,000 over 27,000 on its own line. The sales tax block demonstrates that tax collected is never revenue, dividing receipts by 1.07. Vacation pay follows as an accrued expense. The refinancing block closes the problem with the standard's two conditions stated plainly, an intent to refinance and the ability shown by an agreement completed before issuance.
Memberships paid in advance
Four hundred annual passes at 600 each, sold October 1. Three months are earned by year end; the remaining 180,000 is a liability to provide climbing time.
Breakage in proportion to use
Of 30,000 in gift cards, 18,000 were redeemed and 3,000 are expected never to be. Two thirds of that breakage, 2,000, is recognized now.
Tax inside the receipts
Register totals of 53,500 include a 7 percent sales tax. Dividing by 1.07 separates 50,000 of sales from 3,500 owed to the state.
Vacation earned, not taken
Twelve employees with five unused days each, at eight hours and 20 dollars an hour, produce a 9,600 accrual for compensated absences.
A note that stays long-term
The 300,000 note matures in April, but a five-year refinancing signed in February, before issuance, keeps it out of current liabilities, with a note explaining why.
Where marks go in AC301 Unit 2
Recognizing the whole 240,000 of memberships as revenue in October is the most expensive error here, overstating income by 180,000 and understating liabilities by the same amount. Breakage handled at either extreme costs next: recognizing all 3,000 immediately, or none until the cards expire, departs from the proportional pattern most AC301 problems specify. Sales tax computed as 7 percent of 53,500 rather than extracted from it gives 3,745 and misstates both sales and the payable. Graders deduct for omitting the vacation accrual when the facts state that unused days carry forward. The refinanced note loses points in two opposite ways: left in current liabilities despite the completed agreement, or moved to long-term on intent alone, without an agreement in hand before issuance.
Get a AC301 Unit 2 example written to your instructions
Which obligations appear in your Unit 2 problem decides the blocks, so send its sale dates, redemption data, tax rates, payroll details and any refinancing terms, plus the rubric. Each liability comes back measured, classified and journalized within 24-48h. The first custom sample is free, and blocks the problem lacks are simply left out.
AC301 Unit 2 questions, answered
Why is gift card breakage recognized before the cards expire?
Because under ASC 606 a company that expects to keep some unredeemed balances recognizes that expected breakage in proportion to the pattern of rights its customers do exercise. Waiting until expiry would delay revenue the company already expects to keep, and recognizing it all at sale would anticipate redemptions still to come. When breakage cannot be estimated, it waits until redemption becomes remote.
What if the refinancing agreement is signed after the statements are issued?
Then the note is current. The standard asks whether the ability to refinance existed before the statements were issued or available to be issued, and an agreement signed later does not qualify, however certain the renewal seemed. Some AC301 problems move the signing date to test exactly this. The sample reads the dates in the facts and states which side of issuance the agreement falls on.
Do sick days need an accrual like vacation days?
Usually not. The accrual for compensated absences applies when the rights have been earned, vest or accumulate, payment is probable and the amount can be estimated. US GAAP relaxes the rule for sick pay that accumulates but does not vest, allowing it to be expensed when taken. The sample accrues sick pay only when the problem states that unused days are paid out.