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Yukon territorial government entered into an agreement with HEMI to open a warehouse in Whitehorse. The agreement required the Yukon territorial government to prepay $10,000,000
- Yukon territorial government entered into an agreement with HEMI to open a warehouse in Whitehorse. The agreement required the Yukon territorial government to prepay $10,000,000 for future equipment purchases and to buy all its equipment from HEMI over the next 5 years. The government also agreed to only use $9,000,000 of the prepayment (i.e., give HEMI a breakage if equipment is supplied from the Whitehorse warehouse). In 2019, HEMI supplied $1,800,000 of equipment from its Whitehorse warehouse. The Unearned Revenues general ledger account is at a balance of $8,200,000 ($10,000,000 less $1,800,000). No adjustment has been made to recognize the breakage. Provide an adjusting journal entry to recognize the breakage for the year-ended December 31, 2019 (show your computations).
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