Accounting for Consideration Payable Furniture Manufacturer Inc. sells 1,000 chairs to a retailer for $400,000 (with a cost of $240,000) in June 2020. Additionally, Furniture Manufacturer Inc. agrees to pay $4,000 toward an advertising promotion campaign that the retailer will provide. The retailer will provide the advertising electronically and through local print media. The cost for the advertising campaign was negotiated as part of the revenue contract. a. Prepare the entry for June 2020 to record Furniture Manufacturer Inc.'s sales revenue and cost of sales, assuming cash collected is net of the advertising fee. b. Prepare the entry in June 2020 to record Furniture Manufacturer Inc.'s sales revenue and cost of sales now assuming that $500,000 cash is collected this month. The advertising fee will be paid next month to the customer. Note: If a journal entry (or a line of a journal entry) isn't required for the transaction, select "N/A"as the account name and leave the Dr. and Cr. answers blank (zero). a. Account Name Dr. Cr. Sales Revenue To record the sale of product. To record the cost of sales. b. Account Name Dr. Cr. Sales Revenue To record the sale of product. 0 x To record the cost of sales.

Accounting for Consideration Payable Furniture Manufacturer Inc. sells 1,000 chairs to a retailer for $400,000 (with a cost of $240,000) in June 2020. Additionally, Furniture Manufacturer Inc. agrees to pay $4,000 toward an advertising promotion campaign that the retailer will provide. The retailer will provide the advertising electronically and through local print media. The cost for the advertising campaign was negotiated as part of the revenue contract. a. Prepare the entry for June 2020 to record Furniture Manufacturer Inc.'s sales revenue and cost of sales, assuming cash collected is net of the advertising fee. b. Prepare the entry in June 2020 to record Furniture Manufacturer Inc.'s sales revenue and cost of sales now assuming that $500,000 cash is collected this month. The advertising fee will be paid next month to the customer. Note: If a journal entry (or a line of a journal entry) isn't required for the transaction, select "N/A"as the account name and leave the Dr. and Cr. answers blank (zero). a. Account Name Dr. Cr. Sales Revenue To record the sale of product. To record the cost of sales. b. Account Name Dr. Cr. Sales Revenue To record the sale of product. 0 x To record the cost of sales.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter12: Current Liabilities

Section: Chapter Questions

Problem 8PB: Air Compressors Inc. purchases compressor parts for its inventory from a supplier. The following...

See similar textbooks

Similar questions

Rix Company sells home appliances and provides installation and service for its customers. On April 1, 2019, a customer purchased a dishwasher that Rix normally sells for 1,000. In addition, the customer purchased the installation service and a 3-year service contract, with stand-alone selling prices of 200 and 400, respectively. Because the customer purchased all three items as a bundle, Rix charged the customer 1,400. Required: 1. How should the transaction price be allocated among the products? 2. Prepare the journal entries to recognize revenue related to each product in 2019.
JustKitchens Inc. provides services to restaurants and hotels. The company supplies paper products, tableware, cookware, restaurant and kitchen equipment, and cleaning supplies. On January 2, 2019, Just-Kitchens enters into a contract with a local restaurant chain to provide its services for 3 years at a cost of 10,000 per year. The restaurant chain pays the total contract fee on January 2, 2019. JustKitchenss stand-alone selling price is also 10,000 per year. After 2 years, the restaurant asks to modify the contract. On January 2, 2021, the companies agree to reduce the fee for the third year to 9,000 in exchange for extending the contract for 2 additional years at a fee of 11,000 per year. This modification is agreed to by both parties, and on that date the restaurant chain pays for the additional 2 years of service. The 11,000 fee for the additional years is the same as JustKitchenss stand-alone price. Required: 1. How should JustKitchens account for the contract modification? 2. Prepare the journal entry that JustKitchens would make over the life of the contract.
Unearned Revenue Jennifers Landscaping Services signed a $400-per-month contract on November 1, 2019, to provide plant watering services for Lola Inc.s office buildings. Jennifers received 4 months' service fees in advance on signing the contract. Required: 1. Prepare Jennifers journal entry to record the cash receipt for the first 4 months. 2. Prepare Jennifers adjusting entry at December 31, 2019. 3. CONCEPTUAL CONNECTION How would the advance payment (account(s) and amounts(s)] be reported in Jennifers December 31, 2019, balance sheet? How would the advance payment [account(s) and amount(s)] be reported in Lolas December 31, 2019, balance sheet?
On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.
Air Compressors Inc. purchases compressor parts for its inventory from a supplier. The following transactions take place during the current year: A. On April 5, the company purchases 400 parts for $8.30 per part, on credit. Terms of the purchase are 4/ 10, n/30, invoice dated April 5. B. On May 5, Air Compressors does not pay the amount due and renegotiates with the supplier. The supplier agrees to $400 cash immediately as partial payment on note payable due, converting the debt owed into a short-term note, with a 7% annual interest rate, payable in three months from May 5. C. On August 5, Air Compressors pays its account in full. Record the journal entries to recognize the initial purchase, the conversion plus cash, and the payment.
Airplanes Unlimited purchases airplane parts from a supplier on March 19 at a quantity of 4,800 parts at $12.50 per part. Terms of the purchase are 3/10, n/30. Airplanes pays one-third of the amount due in cash on March 30 but cannot pay the remaining balance due. The supplier renegotiates the terms on April 18 and allows Airplanes to convert its purchase payment into a short-term note, with an annual interest rate of 9%, payable in six months. Show the entries for the initial purchase, the partial payment, and the conversion.
Mystic Pizza Company purchases a franchise from NY Pizzeria Inc. for 96,000 on June 1, 2019. The franchise will last 8 years. Record Mystic Pizzas purchase of the franchise on June 1 and adjusting entry at the end of 2019.