Recording and Reporting Customer Advances

Manchester Co. operates as a manufacturer of industrial equipment. On March 28, Manchester Co. received an advance payment of $60,000 from a customer on a special order of equipment. On May 1, Manchester Co. prepared an invoice and delivered the equipment to the customer. Total sales price is $240,000 and the remaining balance is due upon delivery of the equipment.

Required

a. Record the entry on March 28 for Manchester Co.s receipt of the advance payment.

b. Indicate how the payment would be reported on Manchesters March 31 financial statements. Ignore the cash account.

c. Record the entry on May 1 for the sale of the equipment assuming that the advance payment was applied to the balance due. Ignore the cost of goods sold entry.