Question

(Existence of a Contract) On May 1, 2017, Richardson Inc. entered into a contract to deliver one of its specialty mowers to Kickapoo Landscaping Co. The contract requires Kickapoo to pay the contract price of \(900 in advance on May 15, 2017. Kickapoo pays Richardson on May 15, 2017, and Richardson delivers the mower (with cost of \)575) on May 31, 2017.

Instructions

(a) Prepare the journal entry on May 1, 2017, for Richardson.

(b) Prepare the journal entry on May 15, 2017, for Richardson.

(c) Prepare the journal entry on May 31, 2017, for Richardson.

Short answer

On May 1, 2017, there will be no entry.

Step-by-step solution

Meaning of Contract Price                

It refers to the cost of the products or services that will be provided under the contract. Contract priceaids in the determination of whether or not a contract exists. If the contract price is not contained in the written contract, the court may determine that there was no contract.

Journal entries for Richardson Inc.

Date	Particular	Debit ($)	Credit ($)
May 1, 2017	No entry
May 15, 2017	Cash a/c	900
	Unearned sales revenue a/c		900
May 31, 2017	Unearned sales revenue a/c	900
	Sales revenue a/c		900
May 31, 2017	Cost of goods sold a/c	575
	Inventory a/c		575