Question

In September 2015, Gaertner Corp. commits to selling 150 of its iPhone-compatible docking stations to Better Buy Co. for R$15,000 (R$100 per product). The stations are delivered to Better Buy over the next 6 months. After 90 stations are delivered, the contract is modified and Gaertner promises to deliver 45 more products for an additional R$4,275 (R$95 per station). All sales are cash on delivery.

Instructions

(a) Prepare the journal entry for Gaertner for the sale of the first 90 stations. The cost of each station is R$54.

(b) Prepare the journal entry for the sale of 10 more stations ( from the first 150 stations) after the contract modification, assuming that the price for the additional stations reflects the standalone selling price at the time of the contract modification. In addition, the additional stations are distinct from the original products as Gaertner regularly sells the products separately.

(c) Prepare the journal entry for the sale of 10 more stations (as in (b) and from the first 150 stations), assuming that the pricing for the additional products does not reflect the standalone selling price of the additional products and the prospective method is used.

Answer 1

	Account Titles and Explanation	Debit	Credit
a	Cash (90*100)	$ 9,000
	Sales revenue		$ 9,000
	(To record sales)
	Cost of goods sold (90*54)	$ 4,860
	Inventory		$ 4,860
	(To record cost of goods sold)
b	Cash (10*1000)	$10,000
	Sales revenue		$10,000
	(To record sales of additional stations)
	Cost of goods sold (10*54)	$     540
	Inventory		$     540
	(To record cost of goods sold)
c	Cash	$978.57
	Sales revenue		$978.57
	(To record sales of additional stations)
	(150-90)*100+4275)/(60+45)*10
	Cost of goods sold (10*54)	$     540
	Inventory		$     540
	(To record cost of goods sold)