Question

Riverbed Mowers Ltd. agreed to sell the City of Halifax four riding mowers and 20 push lawn mowers. The contract price was $66,000. Riverbed normally sells its riding mowers for $13,200 and its push lawn mowers for $880. The contract required the City of Halifax to pay Riverbed once all of the merchandise has been delivered to the city’s public works yard. Riverbed’s management does not expect any returns or any issues with payment.

Riverbed delivered all four of the riding mowers and 14 of the push mowers on April 26. The remaining six push mowers were delivered on May 5. Riverbed received payment from the city on May 18. Riverbed’s cost for each riding mower is $9,130, while the push mowers cost the company $570 each.

Record the transactions for April and May in Riverbed’s records assuming that the company uses a perpetual inventory system.

Date	Account Titles and Explanation	Debit	Credit
April 26May 5May 18
	(To record sales)
April 26May 5May 18
	(To record cost of goods sold)
April 26May 5May 18
	(To record sales)
April 26May 5May 18
	(To record cost of goods sold)
April 26May 5May 18

Answer 1

	Amount $
Riding Mowers-Normal Sales Value	52,800	=13200*4
Push Lawn Mowers- Normal Sales value	17,600	=880*20
Total Normal sales value	70,400
Contract price	66,000
	Amount $
Allocation to Riding Mowers	49,500	=66000*52800/70400
Allocation to Push Lawn Mowers	16,500	=66000*17600/70400
Total Allocation of Contract price	66,000

Date	Account Titles & Explanations	Debit $	Credit $
April.26	Accounts Receivable	61,050
	Sales		61,050
	(49,500 + ( 16,500 x 14 / 20 ) )
	(To record sales)
April.26	Cost of goods sold	44,500
	Merchandise Inventory		44,500
	( 9,130 x 4 ) + ( 570 x 14 )
	(To record cost of goods sold)
May.5	Accounts Receivable	4,950
	Sales		4,950
	( 16,500 x 6 / 20 )
	(To record sales)
May.5	Cost of goods sold	3,420
	Merchandise Inventory		3,420
	(570 x 6 )
	(To record cost of goods sold)
May.18	Cash	66,000
	Accounts Receivable		66,000
	( 61,050 + 4,950 )
	( To record receipts of payment )