Question

Contract Modification

On January 1, 2017, Spring Fashions Inc. enters into a contract with a southeast retail company to provide 500 dresses for $62,500 ($125 per dress) over the next 10 months. On October 1, 2017, after 450 of the dresses had been delivered (50 dresses per month), the contract is modified.

Required:

1.	Fifty dresses were delivered each month for the first 9 months of 2017. Prepare Spring Fashions’s monthly journal entry to record revenue.
2.	Assume that the contract is modified to sell, once the original 500 dresses are delivered, an additional 100 dresses at $110 per dress, which is the stand-alone selling price on October 1, 2017. Assume the dresses are delivered evenly in November and December 2017. Prepare the journal entries to record the contract modification.

CHART OF ACCOUNTS
Spring Fashions Inc.
General Ledger
ASSETS 111 Cash 121 Accounts Receivable 141 Inventory 152 Prepaid Insurance 181 Equipment 198 Accumulated Depreciation LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Revenue 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings	REVENUE 411 Sales Revenue EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 512 Utilities Expense 521 Salaries Expense 532 Bad Debt Expense 540 Interest Expense 541 Depreciation Expense 559 Miscellaneous Expenses 910 Income Tax Expense

Prepare journal entries to record a monthly cash sale on January 31 under the original contract and a monthly cash sale on November 30 under the modified contract.

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4

Answer 1

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Cuedy G2so Sales Sales oCash So 62 SO Sales CaS Ģdes cash SSoo 3 1 Sle and sodyess sold