On 1 July 2019, Entity A entered into the Contract X with a customer, Entity B, to sell Product A for $300 per unit. If Entity B purchases more than 1,000 units of Product A in a 12-month period, Contract X specifies that the price will be reduced to $250 per unit. Entity B agreed to settle all outstanding amount of Contract X in July 2020 when both Entities agreed with the total units of sales on 30 June 2020. For the quarter ended 30 September 2019, Entity A sold 70 units of Product A to Entity B. At that date, Entity A concluded that Entity B's purchases would not exceed the 1,000 unit threshold required for the volume discount. In October 2019, Entity B acquired another production unit which increased the demand for Product A from Entity A. On 30 November 2019, Entity B ordered an additional 900 units of Product A from Entity A. In light of this, Entity A concluded that the customer's purchases are now highly likely to exceed the 1,000 unit threshold in the 12 months to 30 June 2020. In the quarter ended 31 December 2019, Entity A transferred the 900 units of Product A to Entity B. On 31 March 2020, Entity A sold another 25 units of Product A to Entity B. On 30 June 2020, Entity B and Entity A agreed with the total units of sales from 1 July 2019 to 30 June 2020. On 5 July 2020, Entity B settled all the outstanding amount of Contract X with Entity A under the terms of Contract X. The cost of Product A Is $180 per unit. The end or reporting period of Entity A is 30 June. REQUIRED: Provide journal entries for Entity A from 1 January 2020 to 5 July 2020 under relevant accounting standards. ACCOUNTS FOR INPUT: | Bank | Payable | Receivable | Interest expense | Interest revenue | Inventory | PPE | | Asset for product to be returned | Commission expense | Commission revenue | Revenue | | Cost of sales | Contract asset | Contract liability | Retained earnings | No entry | ANSWERS: Journal Entries: Date Account Name Debit ($) Credit ($) Hints For Sequence 1-Jul-19 - - 30-Sep-19 - - - - 30-Nov-19 - - 31-Dec-19 - - - - 31-Mar-20 - - - - 30-Jun-20 - - - - 5-Jul-20 - -
On 1 July 2019, Entity A entered into the Contract X with a customer, Entity B, to sell Product A for $300 per unit. If Entity B purchases more than 1,000 units of Product A in a 12-month period, Contract X specifies that the price will be reduced to $250 per unit. Entity B agreed to settle all outstanding amount of Contract X in July 2020 when both Entities agreed with the total units of sales on 30 June 2020.
For the quarter ended 30 September 2019, Entity A sold 70 units of Product A to Entity B. At that date, Entity A concluded that Entity B's purchases would not exceed the 1,000 unit threshold required for the volume discount.
In October 2019, Entity B acquired another production unit which increased the demand for Product A from Entity A. On 30 November 2019, Entity B ordered an additional 900 units of Product A from Entity A. In light of this, Entity A concluded that the customer's purchases are now highly likely to exceed the 1,000 unit threshold in the 12 months to 30 June 2020. In the quarter ended 31 December 2019, Entity A transferred the 900 units of Product A to Entity B.
On 31 March 2020, Entity A sold another 25 units of Product A to Entity B.
On 30 June 2020, Entity B and Entity A agreed with the total units of sales from 1 July 2019 to 30 June 2020.
On 5 July 2020, Entity B settled all the outstanding amount of Contract X with Entity A under the terms of Contract X.
The cost of Product A Is $180 per unit. The end or reporting period of Entity A is 30 June.
REQUIRED:
Provide
ACCOUNTS FOR INPUT:
| Bank | Payable | Receivable | Interest expense | Interest revenue | Inventory | PPE |
| Asset for product to be returned | Commission expense | Commission revenue | Revenue |
| Cost of sales | Contract asset | Contract liability |
ANSWERS:
Journal Entries:
| Date | Account Name | Debit ($) | Credit ($) | Hints For Sequence |
| 1-Jul-19 | - | |||
| - | ||||
| 30-Sep-19 | - | |||
| - | ||||
| - | ||||
| - | ||||
| 30-Nov-19 | - | |||
| - | ||||
| 31-Dec-19 | - | |||
| - | ||||
| - | ||||
| - | ||||
| 31-Mar-20 | - | |||
| - | ||||
| - | ||||
| - | ||||
| 30-Jun-20 | - | |||
| - | ||||
| - | ||||
| - | ||||
| 5-Jul-20 | - | |||
| - |
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
