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Chapter 18: 28E_3 (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

Prepare the journal entry on February 25, 2017, for Gordon when the shelving unit is delivered to the customer and Gordon receives full payment.

Short Answer

Expert verified

Both sides of the journal total$3,320.

Step by step solution

01

Definition of Cost of Goods Sold

The cost of goods sold includes the cost incurred by the business entity to finish the goods that are being sold. This is deducted from sales for the calculation of gross profit.

02

Journal Entry on 25 Feb 2017

Date

Accounts and Explanation

Debit $

Credit $

25 Feb 2017

Cash

$3,000

Contract assets

$1,200

Sales revenue

$1,800

25 Feb 2017

Cost of goods sold

$320

Inventory

$320

Total
$3,320
$3,320

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Most popular questions from this chapter

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Instructions

Respond to the requirements related to the following independent revenue arrangements for Grill Master products and services.

On October 1, 2017, Grill Master sold one of its super deluxe combination gas/charcoal grills to a local builder. The builder plans to install it in one of its 鈥淧arade of Homes鈥� houses. Grill Master accepted a 3-year, zero-interest-bearing note with face amount of \(5,324. The grill has an inventory cost of \)2,700. An interest rate of 10% is an appropriate market rate of interest for this customer. Prepare the journal entries on October 1, 2017, and December 31, 2017.

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P18-6 (LO3) (Warranty, Customer Loyalty Program) Hale Hardware takes pride as the 鈥渟hop around the corner鈥� that can compete with the big-box home improvement stores by providing good service from knowledgeable sales associates (many of whom are retired, local handymen). Hale has developed the following two revenue arrangements to enhance its relationships with customers and increase its bottom line.

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Instructions

(b) Prepare the journal entries for Hale related to the sales of Hale winches with warranties.

Question: P18-3 (LO2,3,4) (Allocate Transaction Price, Discounts, Time Value) Grill Master Company sells total outdoor grilling solutions, providing gas and charcoal grills, accessories, and installation services for custom patio grilling stations.

Instructions

Respond to the requirements related to the following independent revenue arrangements for Grill Master products and services.

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