Question
Maxwell Textile Inc. manufactures shirts for Santa Fe LLC. Maxwell enters into a contract with Santa Fe on January 1, 2021 to deliver 1,000 T-shirts
Maxwell Textile Inc. manufactures shirts for Santa Fe LLC. Maxwell enters into a contract with Santa Fe on January 1, 2021 to deliver 1,000 T-shirts at $5 each evenly until October 31, 2021. However, on October 1st 2021, they agreed on modifying the contract and Maxwell to deliver additional 100 shirts for $2 each in October 2021. (Cost per shirt is $0.5 throughout year 2021 and Maxwell uses perpetual inventory costing system.)
Please answer the following questions.
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Please indicate if the modification causes a separate contract or not. Explain your
reasoning for your answer.
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Please make the necessary journal entries for the revenue to be recognized for Maxwell in October 2021.
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Financial Accounting Tools for Business Decision Making
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
5th Edition
9781118560952, 1118560957, 978-0470239803
