Accounting $301$

Ch $17-$ Revenue Recognition Assignment $15$ points

On January $1,2027$ Spring Fashions Inc. Eners into a contract with a southeast retail company to provide $500$ dresses for $$62,500($ $$125$ per dress$)$ over the next $10$ months. On October $1,2027,$ after $450$ dresses had been delivered, the contract is modified. The new contract adds the delivery of shoes in addition to the remaining dresses.

Specifically, the contract specifies that the company will deliver $50$ pairs of shoes on November $1$ and they will deliver the remaining $50$ dresses on December $1.$ The retail company will pay $$100$ for each pair of shoes. Spring Fashions normally sells the related shoes for $$180$ per pair.

A$.$ Which of the following best describes this situation?

the modification created a new, separate contract

the modification did not create an new contract. Use the prospective method.

the modification did not create a new contract. Use the cumulative$-$catch up method.

B$.$ Prepare the journal entry Spring Fashion would have made prior to the contract modification when the initial dresses are delivered. Assume they have received no payment yet.

C$.$ Prepare the revenue related journal entry or entries Spring Fashion would have made when the remaining dresses and shoes are delivered after the modification.