Logout Open In App
Open In App
Warning: foreach() argument must be of type array|object, bool given in /var/www/html/web/app/themes/studypress-core-theme/template-parts/header/mobile-offcanvas.php on line 20

Chapter 18: 28E_1 (page 1039)

On January 1, 2017, Gordon Co. enters into a contract to sell a customer a wiring base and shelving unit that sits on the base in exchange for \(3,000. The contract requires delivery of the base first but states that payment for the base will not be made until the shelving unit is delivered. Gordon identifies two performance obligations and allocates \)1,200 of the transaction price to the wiring base and the remainder to the shelving unit. The cost of the wiring base is \(700; the shelves have a cost of \)320.

Instructions

(a) Prepare the journal entry on January 1, 2017, for Gordon.

Short Answer

Expert verified

No Journal entrywill be made on 1 Jan 2017.

Step by step solution

01

Definition of Contract

An agreement between two individuals that create legal relation between them under which each of them is required to complete their respective obligation is known as a contract.

02

Journal Entry for January 1, 2017

No journal entry will be made on 1 January 2017 because neither party has performed the obligation respective to the contract on this date.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

What was viewed as a major criticism of GAAP as it relates to revenue recognition?

Kristin Company sells 300 units of its products for \(20 each to Logan Inc. for cash. Kristin allows Logan to return any unused product within 30 days and receive a full refund. The cost of each product is \)12. To determine the transaction price, Kristin decides that the approach that is most predictive of the amount of consideration to which it will be entitled is the probability-weighted amount. Using the probability-weighted amount, Kristin estimates that (1) 10 products will be returned and (2) the returned products are expected to be resold at a profit. Indicate the amount of (a) net sales, (b) estimated liability for refunds, and (c) cost of goods sold that Kristen should report in its financial statements (assume that none of the products have been returned at the financial statement date).

On May 3, 2017, Eisler Company consigned 80 freezers, costing \(500 each, to Remmers Company. The cost of shipping the freezers amounted to \)840 and was paid by Eisler Company. On December 30, 2017, a report was received from the consignee, indicating that 40 freezers had been sold for \(750 each. Remittance was made by the consignee for the amount due after deducting a commission of 6%, advertising of \)200, and total installation costs of $320 on the freezers sold.

Instructions

(a) Compute the inventory value of the units unsold in the hands of the consignee.

(b) Compute the profit for the consignor for the units sold.

(c) Compute the amount of cash that will be remitted by the consignee.

On July 10, 2017, Amodt Music sold CDs to retailers on account and recorded sales revenue of \(700,000 (cost \)560,000). Amodt grants the right to return CDs that do not sell in 3 months following delivery. Past experience indicates that the normal return rate is 15%. By October 11, 2017, retailers returned CDs to Amodt and were granted credit of \(78,000. Prepare Amodt’s journal entries to record (a) the sale on July 10, 2017, and (b) \)78,000 of returns on October 11, 2017, and on October 31, 2017. Assume that Amodt prepares financial statement on October 31, 2017.

(Franchise Fee, Initial Down Payment) On January 1, 2017, Lesley Benjamin signed an agreement, covering 5 years, to operate as a franchisee of Campbell Inc. for an initial franchise fee of \(50,000. The amount of \)10,000 was paid when the agreement was signed, and the balance is payable in five annual payments of \(8,000 each, beginning January 1, 2018. The agreement provides that the down payment is nonrefundable and that no future services are required of the franchisor once the franchise commences operations on April 1, 2017. Lesley Benjamin’s credit rating indicates that she can borrow money at 11% for a loan of this type.

Instructions

(a) Prepare journal entries for Campbell for 2017-related revenue for this franchise arrangement.

(b) Prepare journal entries for Campbell for 2017-related revenue for this franchise arrangement, assuming that in addition to the franchise rights, Campbell also provides 1 year of operational consulting and training services, beginning on the signing date. These services have a value of \)3,600.

(c) Repeat the requirements for part (a), assuming that Campbell must provide services to Benjamin throughout the franchise period to maintain the franchise value.
See all solutions

Recommended explanations on Business Studies Textbooks

Organizational Communication

Read Explanation

Strategic Direction

Read Explanation

Change Management

Read Explanation

Strategic Analysis

Read Explanation

Human Resources

Read Explanation

Managerial Economics

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free