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.
-
Please indicate if the modification causes a separate contract or not. Explain your
reasoning for your answer.
-
Please make the necessary journal entries for the revenue to be recognized for Maxwell in October 2021.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Financial Accounting Tools For Business Decision Making
Authors: Donald E. Kieso, Paul D. Kimmel, Jerry J. Weygandt
8th Edition
1119316022, 978-1119316022
