Question

On 1 July 2019, Entity A entered into the Contract X with a customer, Entity B, to sell Product A for $300 per unit. If Entity B purchases more than 1,000 units of Product A in a 12-month period, Contract X specifies that the price will be reduced to $250 per unit. Entity B agreed to settle all outstanding amount of Contract X in July 2020 when both Entities agreed with the total units of sales on 30 June 2020.

For the quarter ended 30 September 2019, Entity A sold 70 units of Product A to Entity B. At that date, Entity A concluded that Entity B's purchases would not exceed the 1,000-unit threshold required for the volume discount.

In October 2019, Entity B acquired another production unit which increased the demand of Product A from Entity A. On 30 November 2019, Entity B ordered an additional 900 units of Product A from Entity A. In light of this, Entity A concluded that the customer's purchases are now highly likely to exceed the 1,000-unit threshold in the 12 months to 30 June 2020.  In the quarter ended 31 December 2019, Entity A transferred the 900 units of Product A to Entity B.

On 31 March 2020, Entity A sold another 25 units of Product A to Entity B.

On 30 June 2020, Entity B and Entity A agreed with the total units of sales from 1 July 2019 to 30 June 2020.

On 5 July 2020, Entity B settled all the outstanding amount of Contract X with Entity A in accordance with the terms of Contract X.

The cost of Product A Is $180 per unit.  The end or reporting period of Entity A is 30 June.

REQUIRED:

Provide journal entries for Entity A from 1 January 2020 to 5 July 2020 in accordance with relevant accounting standards.

ACCOUNT NAMES FOR INPUT:

| Plant | Machine | Motor van | Equipment | Land | Building | Inventory | Intangible assets |

| Bank | Payable | Receivable | Other income | Other expense | Interest expense | Interest revenue |

| Depreciation | Accum. depreciation | Impairment loss | Reversal of impairment loss | Goodwill |

| Loss on disposal | Gain on disposal | Restoration liability | Revaluation surplus | Revaluation deficit |

| Asset for product to be returned | Commission expense | Commission revenue | Revenue |

| Cost of sales | Refund liability | Contract asset | Contract liability | Retained earnings | No entry |

ANSWERS:

Journal Entries:

Date	Account Name	Debit ($)	Credit ($)	Hints For Sequence
1-Jul-19	Blank 1	Blank 2
	Blank 3		Blank 4
30-Sep-19	Blank 5	Blank 6
	Blank 7	Blank 8		Judge Dr/Cr side
	Blank 9	Blank 10		Judge Dr/Cr side
	Blank 11	Blank 12		Judge Dr/Cr side
30-Nov-19	Blank 13	Blank 14
	Blank 15		Blank 16
31-Dec-19	Blank 17	Blank 18
	Blank 19	Blank 20		Judge Dr/Cr side
	Blank 21	Blank 22		Judge Dr/Cr side
	Blank 23	Blank 24		Judge Dr/Cr side
31-Mar-20	Blank 25	Blank 26
	Blank 27	Blank 28		Judge Dr/Cr side
	Blank 29	Blank 30		Judge Dr/Cr side
	Blank 31	Blank 32		Judge Dr/Cr side
30-Jun-20	Blank 33	Blank 34
	Blank 35		Blank 36
	Blank 37	Blank 38
	Blank 39		Blank 40
5-Jul-20	Blank 41	Blank 42
	Blank 43		Blank 44

Answer 1

Journal Entries:

Date	Account Name	Debit ($)	Credit ($)	Hints For Sequence
1-Jul-19	No entry	-	-	(At the time of signing of contract,no entry is passed in the books)
30-Sep-19	Recievables	$21,000
	Cost of sales	$12,600
	Revenue		$8,400
	Inventory		$12,600
	( To record the sales of 70 Unit of product A)
30-Nov-19	No entry
	(No entry is passed when an order is recieved)
31-Dec-19	Recievables	$270,000
	Cost of sales	$162,000
	Revenue		$108,000
	Inventory		$162,000
	(To record the sales of 900 Unit of product A)
31-Mar-20	Recievables	$7,500
	Cost of sales	$4,500
	Revenue		$3,000
	Inventory		$4,500
	(To record the sales of 25 Unit of product A)
30-Jun-20	No entry
5-Jul-20	Cash	$298,500
	Recievables		$298,500