Question

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

Prepare the journal entry on February 5, 2017, for Gordon when the wiring base is delivered to the customer.

Short answer

Both sides of the journal total$1,900.

Step-by-step solution

Definition of Sales Revenue

Sales revenue can be defined as the inflow of cash or benefit from the transfer/sale made to the customers. Transfer/sale might include a product or service.

Journal Entries to Record the Delivery of Wiring Base on 5 Feb 2017

Date	Accounts and Explanation	Debit $	Credit $
5 Feb 2017	Contract asset	$1,200
	Sales revenue		$1,200
5 Feb 2017	Cost of goods sold	$700
	Inventory		$700
Total		$1,900	$1,900