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In September 2017, Gaertner Corp. commits to selling 150 of its iPhone-compatible docking stations to Better Buy Co. for \(15,000 (\)100 per product). The stations are delivered to Better Buy over the next 6 months. After 90 stations are delivered, the contract is modified and Gaertner promises to deliver an additional 45 products for an additional \(4,275 (\)95 per station). All sales are cash on delivery.

Instructions

(b) Prepare the journal entry for the sale of 10 more stations after the contract modification, assuming that the price for the additional stations reflects the standalone selling price at the time of the contract modification. In addition, the additional stations are distinct from the original products as Gaertner regularly sells the products separately.

Short Answer

Expert verified

Sales revenue from selling 10 more stations is $1,000.

Step by step solution

01

Definition of Standalone Selling Price

When a company sells a product or service at a certain price to a single customer that is known as the standalone selling price.

02

Journal entries for sale of 10 more stations, reflecting the standalone selling price

Date

Particular

Debit ($)

Credit ($)

Cash a/c

1,000

Sales revenue a/c

1,000

Cost of goods sold a/c

540

Inventory a/c

540

Working Notes:

Salesrevenue=Unitssold×Sellingpriceperunit=10×$100=$1,000Costofgoodssold=Unitssold×Costperunit=10×$54=$540

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Most popular questions from this chapter

In September 2017, Gaertner Corp. commits to selling 150 of its iPhone-compatible docking stations to Better Buy Co. for \(15,000 (\)100 per product). The stations are delivered to Better Buy over the next 6 months. After 90 stations are delivered, the contract is modified and Gaertner promises to deliver an additional 45 products for an additional \(4,275 (\)95 per station). All sales are cash on delivery.

Instructions

(a) Prepare the journal entry for Gaertner for the sale of the first 90 stations. The cost of each station is $54.

(b) Prepare the journal entry for the sale of 10 more stations after the contract modification, assuming that the price for the additional stations reflects the standalone selling price at the time of the contract modification. In addition, the additional stations are distinct from the original products as Gaertner regularly sells the products separately.

(c) Prepare the journal entry for the sale of 10 more stations (as in (b)), assuming that the pricing for the additional products does not reflect the standalone selling price of the additional products and the prospective method is used.

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Instructions

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(b) Assume the marina operator is unsophisticated in business. Explain the managerial significance of the above accounting to this person.

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Refer to the information in Question 14. Assume that Allee has limited experience with a construction project on the same scale as the ten speedboats. How does this affect the accounting for the variable consideration?

Describe the revenue recognition principle.

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