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

ekkarill92 answered 1 year ago

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