Question
On 1 July 2021, Entity A entered into Contract X with a customer, Entity B, to sell Product A for $455 per unit. If Entity
On 1 July 2021, Entity A entered into Contract X with a customer, Entity B, to sell Product A for $455 per unit. If Entity B purchases more than 800 units of Product A in a 12-month period, Contract X specifies that the price will be reduced to $385 per unit. Entity B agreed to settle all outstanding amounts of Contract X in July 2022 after both Entities agreed on the total units of sales on 30 June 2022. For the quarter that ended 30 September 2021, Entity A sold 215 units of Product A to Entity B. At that date, Entity A concluded that Entity B's purchases would not exceed the 800 units threshold required for the volume discount. In October 2021, Entity B acquired another production unit which increased the demand for Product A from Entity A. On 30 November 2021, Entity B ordered an additional 582 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 800 units threshold in the 12 months to 30 June 2022. On 15 December 2021, Entity A transferred the 582 units of Product A to Entity B. On 31 March 2022, Entity A sold another 2 units of Product A to Entity B. On 30 June 2022, Entity B and Entity A agreed on the total units of sales from 1 July 2021 to 30 June 2022. On 5 July 2022, Entity B settled all the outstanding amounts of Contract X with Entity A under the terms of Contract X. The cost of Product A Is $245 per unit. The end of the reporting period of Entity A is 30 June.
REQUIRED:
Provide journal entries for Entity A from 1 July 2021 to 5 July 2022 under relevant accounting standards.
ACCOUNTS FOR INPUT:
| Bank | Payable | Receivable | Interest expense | Interest revenue | Inventory | PPE |
| Asset for product to be returned | Commission expense | Commission revenue | Revenue |
| Cost of sales | Contract asset | Contract liability | Retained earnings | No entry |
ANSWERS:
Journal Entries:
| Date | Account Name | Debit ($) | Credit ($) | Hints For Sequence |
| 1-Jul-21 | - | |||
| - | ||||
| 30-Sep-21 | - | |||
| - | ||||
| - | ||||
| - | ||||
| 30-Nov-21 | - | |||
| - | ||||
| 15-Dec-21 | - | |||
| - | ||||
| - | ||||
| - | ||||
| 31-Mar-22 | - | |||
| - | ||||
| - | ||||
| - | ||||
| 30-Jun-22 | - | |||
| - | ||||
| 30-Jun-22 | - | |||
| - | ||||
| 5-Jul-22 | - | |||
| - |
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College Accounting Chapters 1-30
Authors: John Price, M. David Haddock, Michael Farina
14th edition
978-1259284861, 1259284867, 77862392, 978-0077862398
