Question

exercises 0 Saved Holt Industries received a $1,400 prepayment from the Ramirez Company for the sale of new office furniture. Holt will bill Ramirez an additional $2.500 upon delivery of the furniture to Ramirez. Upon receipt of the $1.400 prepayment, how much should Holt recognize for a contract asset, a contract liability, and accounts receivable? (Leave no cells blank - be certain to enter "0" wherever required.) Contract asset Contract liability Accounts receivable

Answer 1

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Contract asset is recorded when only part of the contract has been performed.
Contract liability is recorded when the customer prepays on his own will or as per contract.
Account receivable is recorded when the contract has been performed in full and amount is due from customer.
In the present case Holt Industries received $ 1,400 as prepayment from the Ramirez Company.
Furniture is not yet provided to the customer.
So $ 1,400 will be recorded as Contract liability because the customer prepaid the amount.
Contract asset will be $ 0 as the contract has not yet performed.
Account receivable will be $ 0 as the contract has not been performed at all.
	Amount $
Contract asset	0.00
Contract liability	1,400.00
Account receivable	0.00