complete all. there are 13 journal entries
On January 2, 2019. Tl enters into a contract with Drewry Corp. to build a new plece of equipment. The contract price is $3,200,000, and construction is expected to take 18 months. Drewry is billed and pays $1,600,000 of the contract price on January 2, 2019, and will pay the balance at completion. Tl estimates that the cost of construction will be $2,300,000. Drewry includes two perlormance bonuses in the contact: - U.S. Bonus: It the equipment design receives a U.S. patent by March 15, 2020, Drewry will pay a $200,000 bonus. - International Bonus: It the equipment receives approval for international distribution by January 31, 2020, Drewry will pay a $1,000,000 bonus. The bonuses are payable when a U.S. patent is approved and when international distribution is approved. On the date the contract is signed, TI estimates that there is an 80% chance it will receive U.S, patent protection by March 15,2020 , but only a 30% chance that the equipment will be approved tor international distribution. TI received a U.S. patent on the equipment design on November 15, 2019, and immediately billed Drewry and received its bonus payment. On Decernber 31. 2019, TI has incurred $1,840,000 of contract costs and is 80% complete. TI won approval for intemational distribution on January 15,2020 , and completed the equipment project on April 15, 2020, at a cost of $2,300,000. Required: 1. Identify the performance obligations in the contract. 2. Provide the journal entries that TI should make to recognize revenue from the contract. CHART OF ACCOUNTS Drewry Corp. General Ledger 540 Interest Expense LIABILITIES 541 Depreciation Expense 211 Accounts Payable 559 Miscellaneous Expenses 231 Salaries Payable 910 Income Tax Expense 250 Unearned Revenue 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings 1. Identify the performance obligations in the contract. Check all that apply. Build the new piece of equipment Acquire the patent. Receive international distribution approval 2. Prepare the joumal entries to record 1. the initial contract billing and receipt on January 2,2019 2. the patent billing and receipt on November 15 3. contract costs incurred for the year on December 31 4. profit recognized for the year on December 31 5. the partial contract billing and receipt on January 15, 2020 6. costs incurred for the year to date on April 15 7. profit recognized for the year to date on April 15 8. the final entry to close the construction accounts on April 15, 2020 General Journal UAIE ACCOUNI IIILE HUSI. KER. 1 2 3 4 5 6 7 (8. 9. 10 11 12. 13
