Question

Cool-IT Ltd. manufactures and sells air conditioning equipment to retailers across North America. In 2020, Cool-IT signed a two-year contract with BigMart Ltd. to supply it with 63,300 units at a price of $78 per unit. Cool-IT’s cost to manufacture these units is $51. The following schedule summarizes the production, delivery, and payments in relation to the contract. Production costs are recorded to inventory: 2020 2021 Total Air conditioning units delivered 41,500 21,800 63,300 Production costs incurred $2,116,500 $1,111,800 $3,228,300 Cash payments received $2,780,000 $1,868,400 $4,648,400

Prepare the required summary journal entries for the contract based on your analysis in part “a.” (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit 2020 (To record sales revenue) (To record cost of goods sold) (To record collections on account) 2021 (To record sales revenue) (To record cost of goods sold) (To record collections on account)

Answer 1

Answer -

Step - (1) - Information Given -

Cool-IT’s cost to manufacture is $51 per unit and sale price is $78 per unit

Cool-IT Ltd. sells air conditioning equipment to BigMart Ltd.

	2020	2021	Total
Air conditioning units delivered to BigMart Ltd.	41500	21800	63300
Cash payments received from BigMart Ltd	$2780000	$1868400	$4648400

.

Step - (2) -

Journal of Cool-IT Ltd.

Date	Particulars	Debit ($)	Credit ($)
2020	Accounts Receivable - BigMart Ltd Sales [ 41500 units * $78 per unit ] (To record sales revenue)	3237000 -	- 3237000
	Cost of Goods Sold [ 41500 units * $51 per unit ] Inventory - air conditioning equipment (To record cost of goods sold)	2116500 -	- 2116500
	Cash Accounts Receivable - BigMart Ltd (To record collections on account)	2780000 -	- 2780000
2021	Accounts Receivable - BigMart Ltd Sales [ 21800 units * $78 per unit ] (To record sales revenue)	1700400 -	- 1700400
	Cost of Goods Sold [ 21800 units * $51 per unit ] Inventory - air conditioning equipment (To record cost of goods sold)	1111800 -	- 1111800
	Cash Accounts Receivable - BigMart Ltd (To record collections on account)	1868400 -	- 1868400
Total		12814100	12814100