At 1. March, 2017, Crandall Co. made a contract to sell 100 products to a customer for €10,000 (€100 per product) at various points in time over a six-month period. The company is going to deliver the products in two ways, 60 units at May 1, 2017 and 40 units at July 1, 2017.After 60 products have been delivered at May 1, 2017, Crandall modifies the contract by promising to deliver 20 more products for an additional €1,900, or €95 per product (which is the standalone selling price of the products at the time of the contract modification) before September 1, 2017. Crandall regularly sells the products separately.
What journal entries should Crandall company make regards to this contract 2017? Show journal entries for:
a) 1. March 2017 - When the contract is made
b) 1. May 2017 - when the company delivers the first 60 untis
c) 1. July 2017 - when the company delivers the next 40 units
d) 1. September 2017 - when the company delivers the last 20 units
a) In this case no Journal entry will be passed as the contract is made without any cash transactions, promissory note or in exchange of another asset between two parties.
Date | Particulars | LF | Debit | Credit | |
---|---|---|---|---|---|
b) | 1 May 2017 | Cash A/c | 60000 | ||
To Sales A/c | 60000 | ||||
(Being 60 units sold at 100 each) | |||||
c) | 1 Jul 2017 | Cash A/c | 40000 | ||
To Sales A/c | 40000 | ||||
(Being 40 units sold at 100 each) | |||||
d) | 1 Sep 2017 | Cash A/c | 1900 | ||
To Sales A/c | 1900 | ||||
(Additional 20 units sold at 95 eash as per standalone selling price ) |
Note: Though the standalone selling price at the time of contract modification was changed to 95 per unit and was made before selling the rest 40 units, it will not affect the previously made agreement on 100 units of products as it was clearly stated that additional 20 products will be sold at 1900. Ie- 95 x 20 = 1900. Hence rest 40 units will be sold at the earlier agreed price ie- 100 per unit.
At 1. March, 2017, Crandall Co. made a contract to sell 100 products to a customer...
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