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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Chlorine Corp. has a contract to deliver pool products to the community aquatic center. The contract with the aquatic center states that the first 1,000 gallons of chemicals will cost $36 per gallon. However, the cost will drop to $30 per gallon for all purchases over 1,000 gallons. Based on its experience, Chlorine Corp. estimates that the aquatic center will use 1,400 gallons of chemicals.

What transaction price per gallon should Chlorine use for this contract?

  1. a. $36.00
  2. b. $33.00
  3. c. $34.29
  4. d. $30.00

To determine

Identify the transaction price used by Corporation C for the contract.

Explanation

Transaction price: Transaction price is the amount of consideration that is estimated by the company to be authorized in exchange, for delivering the promised goods and services to the customer. Transaction price is examined by the seller by analyzing the terms of the contract and the normally conducts of the business.

Compute the amount of transaction price:

ParticularsAmount ($)
Cost of First 1,000 Gallons (1,000gallons×$36)36,000
Cost of Purchase Over 1,000 Gallons (400gallons×$30)12,000
Total contract

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