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.

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:

$\begin{array}{rcl}\mathrm{Sales}\mathrm{revenue}& =& \mathrm{Units}\mathrm{sold}\times \mathrm{Selling}\mathrm{price}\mathrm{per}\mathrm{unit}\\ & =& 10\times \$100\\ & =& \$1,000\\ \mathrm{Cost}\mathrm{of}\mathrm{goods}\mathrm{sold}& =& \mathrm{Units}\mathrm{sold}\times \mathrm{Cost}\mathrm{per}\mathrm{unit}\\ & =& 10\times \$54\\ & =& \$540\end{array}$

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