Question
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 | ||||||
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