Question
On 1 July 2019 , Entity A entered into the Contract X with a customer, Entity B, to sell Product A for $420 per unit.
On 1 July 2019, Entity A entered into the Contract X with a customer, Entity B, to sell Product A for $420 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 $370 per unit. Entity B agreed to settle all outstanding amount of Contract X in July 2020 after both Entities agreed with the total units of sales on 30 June 2020.
For the quarter ended 30 September 2019, Entity A sold 120 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 850 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. On 15 December 2019, Entity A transferred the 850 units of Product A to Entity B.
On 31 March 2020, Entity A sold another 28 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 $230 per unit. The end or reporting period of Entity A is 30 June.
REQUIRED:
Provide journal entries for Entity A from 1 January 2020 to 5 July 2020 under relevant accounting standards.
ACCOUNTS FOR INPUT:
| Bank | Payable | Receivable | Interest expense | Interest revenue | Inventory | PPE |
| Asset for product to be returned | Commission expense | Commission revenue | Revenue |
| Cost of sales | Contract asset | Contract liability | Retained earnings | No entry |
ANSWERS:
Journal Entries:
Date | Account Name | Debit ($) | Credit ($) | Hints For Sequence |
1-Jul-19 | - | |||
- | ||||
30-Sep-19 | - | |||
- | ||||
- | ||||
- | ||||
30-Nov-19 | - | |||
- | ||||
31-Dec-19 | - | |||
- | ||||
- | ||||
- | ||||
31-Mar-20 | - | |||
- | ||||
- | ||||
- | ||||
30-Jun-20 | - | |||
- | ||||
30-Jun-20 | - | |||
- | ||||
5-Jul-20 | - | |||
- |
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