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Chapter 18: 29E_b (page 1040)

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

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Most popular questions from this chapter

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 conditions when contract assets and liabilities are recognized and presented in financial statements.

(Determine Transaction Price) Jeff Heun, president of Concrete Always, agrees to construct a concrete cart path at Dakota Golf Club. Concrete Always enters into a contract with Dakota to construct the path for \(200,000. In addition, as part of the contract, a performance bonus of \)40,000 will be paid based on the timing of completion. The performance bonus will be paid fully if completed by the agreed-upon date. The performance bonus decreases by $10,000 per week for every week beyond the agreed-upon completion date. Jeff has been involved in a number of contracts that had performance bonuses as part of the agreement in the past. As a result, he is fairly confident that he will receive a good portion of the performance bonus. Jeff estimates, given the constraints of his schedule related to other jobs , that there is 55% probability that he will complete the project on time, a 30% probability that he will be 1 week late, and a 15% probability that he will be 2 weeks late.

Instructions

(a) Determine the transaction price that Concrete Always should compute for this agreement.

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Instructions

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

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