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Chapter 18: 28E_1 (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

(a) Prepare the journal entry on January 1, 2017, for Gordon.

Short Answer

Expert verified

No Journal entrywill be made on 1 Jan 2017.

Step by step solution

01

Definition of Contract

An agreement between two individuals that create legal relation between them under which each of them is required to complete their respective obligation is known as a contract.

02

Journal Entry for January 1, 2017

No journal entry will be made on 1 January 2017 because neither party has performed the obligation respective to the contract on this date.

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Most popular questions from this chapter

Leno Computers manufactures tablet computers for sale to retailers such as Fallon Electronics. Recently, Leno sold and delivered 200 tablet computers to Fallon for $20,000 on January 5, 2017. Fallon has agreed to pay for the 200 tablet computers within 30 days. Fallon has a good credit rating and should have no difficulty in making payment to Leno. (a) Explain whether a valid contract exists between Leno Computers and Fallon Electronics. (b) Assuming that Leno Computers has not yet delivered the tablet computers to Fallon Electronics, what might cause a valid contract not to exist between Leno and Fallon?

What is the nature of a sale on consignment?

What are the two types of losses that can become evident in accounting for long-term contracts? What is the nature of each type of loss? How is each type accounted for?

When is revenue recognized in the following situations? (a) Revenue from selling products, (b) revenue from services performed, (c) revenue from permitting others to use company assets, and (d) revenue from disposing of assets other than products.

Turner, Inc. began work on a \(7,000,000 contract in 2017 to construct an office building. During 2017, Turner, Inc. incurred costs of \)1,700,000, billed its customers for \(1,200,000, and collected \)960,000. At December 31, 2017, the estimated additional costs to complete the project total $3,300,000. Prepare Turner’s 2017 journal entries using the percentage-of-completion method.
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