Ask Question
13 September, 08:45

On May 1, 2021, Meta Computer, Inc., enters into a contract to sell 4,100 units of Comfort Office Keyboard to one of its clients, Bionics, Inc., at a fixed price of $69,700, to be settled by a cash payment on May 1. Delivery is scheduled for June 1, 2021. As part of the contract, the seller offers a 25% discount coupon to Bionics for any purchases in the next six months. The seller will continue to offer a 5% discount on all sales during the same time period, which will be available to all customers. Based on experience, Meta Computer estimates a 50% probability that Bionics will redeem the 25% discount voucher, and that the coupon will be applied to $41,000 of purchases. The stand-alone selling price for the Comfort Office Keyboard is $19.00 per unit.

+4
Answers (1)
  1. 13 September, 09:54
    0
    Journal Entry

    Explanation:

    1. There are two obligations in this contract

    a. keyboard

    b. Customer option for future discount

    2. Cash Dr, $69,700

    To Deferred revenue - keyboard $66,215

    To Deferred revenue - discount coupon $3,485

    (Being cash is recorded)

    Working note:-

    Keyboards = 4,100 * $19

    = $77,900

    Option = $41,000 * (0.25 - 0.05) * 0.50

    = $4,100

    Allocation

    For keyboard

    = $77,900 : ($77,900 + 4,100)

    = 0.95

    Deferred revenue Keyboard = $69,700 * 0.95

    = $66,215

    Option = 4,100 : ($77,900 + 4,100)

    = 0.05

    Deferred revenue - discount coupon = $69,700 * 0.05

    = $3,485

    3. Cash Dr, $69,700

    To Deferred revenue Keyboard $69,700

    (Being cash is recorded)
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “On May 1, 2021, Meta Computer, Inc., enters into a contract to sell 4,100 units of Comfort Office Keyboard to one of its clients, Bionics, ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers