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In: Accounting

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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