Question
In: Accounting
On March 1, 2021, Gold Examiner receives $154,000 from a local bank and promises to deliver...
On March 1, 2021, Gold Examiner receives $154,000 from a local bank and promises to deliver 96 units of certified 1-oz. gold bars on a future date. The contract states that ownership passes to the bank when Gold Examiner delivers the products to Brink’s, a third-party carrier. In addition, Gold Examiner has agreed to provide a replacement shipment at no additional cost if the product is lost in transit. The stand-alone price of a gold bar is $1,560 per unit, and Gold Examiner estimates the stand-alone price of the replacement insurance service to be $65 per unit. Brink’s picked up the gold bars from Gold Examiner on March 30, and delivery to the bank occurred on April 1.
Required:
1. How many performance obligations are in this
contract?
2. to 4. Prepare the journal entry Gold Examiner
would record on March 1, March 30 and April 1.
Solutions
Expert Solution
| 1 | ||||
| Number of performance obligations in the contract is 2. | ||||
| 2 | ||||
| Debit | Credit | |||
| March 01, 2021 | Cash | 154000 | ||
| Deferred revenue—gold bars | 147840 | |||
| Deferred revenue—insurance | 6160 | |||
| March 30, 2021 | Deferred revenue—gold bars | 147840 | ||
| Sales revenue | 147840 | |||
| April 01, 2021 | Deferred revenue—insurance | 6160 | ||
| Service revenue | 6160 | |||
| Workings: | ||||
| Value of the gold bars | 149760 | =1560*96 | ||
| Standalone selling price of the insurance | 6240 | =65*96 | ||
| Total of standalone prices | 156000 | |||
| Allocation: | ||||
| Deferred revenue—gold bars | 147840 | =154000*149760/156000 | ||
| Deferred revenue—insurance | 6160 | =154000*6240/156000 | ||
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