Question

On June 1, 2017, Mills Company sells \(200,000 of shelving units to a local retailer, ShopBarb, which is planning to expand its stores in the area. Under the agreement, ShopBarb asks Mills to retain the shelving units at its factory until the new stores are ready for installation. Title passes to ShopBarb at the time the agreement is signed. The shelving units are delivered to the stores on September 1, 2017, and ShopBarb pays in full. Prepare the journal entries for this bill-and-hold arrangement (assuming that conditions for recognizing the sale as a bill-and-hold sale have been met) for Mills on June 1 and September 1, 2017. The cost of the shelving units to Mills is \)110,000.

Short answer

Revenue recognized by Mills Company is $200,000.

Step-by-step solution

Meaning of Bill-and-Hold Arrangement

Transaction in which customer pay for goods and services before it is delivered to the customer is known asbill-and-hold arrangement. It is a type ofsale arrangement in which goods and services are not delivered to the customers and are invoiced by the seller for the goods and services.

Journal entries for bill-and-hold arrangement

Date	Particular	Debit ($)	Credit ($)
June 1, 2017	Accounts receivables a/c	200,000
	Sales revenue a/c		200,000
June 1, 2017	Cost of goods sold a/c	110,000
	Inventory a/c		110,000
September 1, 2017	Cash a/c	200,000
	Accounts receivables a/c		200,000