On December 10, 2019, Kool-Air Solutions agreed to manufacture and supply 790 refrigerators used by Vandelay...

On December 10, 2019, Kool-Air Solutions agreed to manufacture and supply 790 refrigerators used by Vandelay Industries. Vandelay deposited $195 per unit upon signing the 3-year purchase agreement, which set the selling price of each refrigerator at $995. Kool-Air’s inventory cost is $485 per unit. No units were delivered during 2019. During 2020, 190 units will be delivered; during 2021, 340 units will be delivered; and during 2022, the remaining units will be delivered. Assume Kool-Air uses a perpetual inventory system and Vandelay pays in cash upon delivery of units for amounts not covered by the deposit.

	Required:
1.	Conceptual Connection: Prepare the entry by Kool-Air to record receipt of the deposit during 2019. How would the deposit be reported in the financial statements at the end of 2019?
2.	Conceptual Connection: Prepare the entry by Kool-Air to record the delivery of 190 units during 2020. How would the deposit be reported in the financial statements at the end of 2020?
3.	Prepare the entry by Kool-Air to record the delivery of 340 units during 2021.

Solutions

Expert Solution

	In the Books of Kool-Air Solutions

	Date	General Journal		Debit	Credit
				Amount in $	Amount in $	For your understanding
Requirement 1	2019	Accounts Receivable-Vandelay Industries		154050		=790*195
			Unearned Revenue		154050
		To record the advance received from customer


	Deposit will be shown as Unearned Revenue under current liabilities section of the Balance sheet
			Amount of Unearned Revenue under current liabilities section is		154050	=790*195

Requirement2	2020	Accounts Receivable-Vandelay Industries		152000		=190*800
		Unearned Revenue		37050		=190*195
			Sales Revenue		189050	=190*995
		To record the sales Revenue

	Deposit will be shown as Unearned Revenue under current liabilities section of the Balance sheet
			Amount of Unearned Revenue under current liabilities section is		117000	=(790-190)*195

Requirement 3	2021	Accounts Receivable-Vandelay Industries		272000		=340*800
		Unearned Revenue		66300		=340*195
			Sales Revenue		338300	=340*995

	Deposit will be shown as Unearned Revenue under current liabilities section of the Balance sheet
			Amount of Unearned Revenue under current liabilities section is		50700	=(790-190-340)*195

ekkarill92 answered 2 years ago

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