Question
In: Advanced Math
P11.7A (LO 4) On April 2, 2021, Pharma Company entered into a contract to supply medication...
P11.7A (LO 4)
On April 2, 2021, Pharma Company entered into a contract to
supply medication to Laxall Drug Stores, FOB shipping point, terms
2/30, n/45. The selling price of the medication is $40,000 and the
medication cost Pharma Company $25,000. Pharma has a stated return
policy that goods may be returned within 30 days. The medication
was shipped on April 10, 2021. Pharma's management estimates
returns using the expected value method and sales discounts are
estimated using the most likely outcome. Based on past experience
with this product, returns are 5% of sales 50% of the time, 10% of
sales 20% of the time, and 20% of sales 30% of the time. Laxall
Drug Stores will most likely pay within the discount period. Pharma
Company uses the contract-based approach for revenue
recognition.
Instructions
a. Describe the rights and obligations of each party in the
contract between Pharma Company and Laxall Drug Stores.
b. Identify the variable consideration in the contract.
c. Calculate the transaction price. (Round all amounts to the
nearest dollar.)
d. Prepare journal entries to recognize revenue on the
appropriate date. (Hint: The expected value method is also used to
determine the amount for cost of goods sold and estimated inventory
returns.)
Solutions
Expert Solution
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Colby Messinger answered 1 year agoRelated Solutions
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Billings during the year
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In 2021, the Westgate Construction Company entered into a contract to construct a road for Santa...
In 2021, the Westgate Construction Company entered into a
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Assume that Westgate Construction’s contract with Santa...
In 2021, the Westgate Construction company entered into a contract to construct a road for Santa...
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a contract to construct a road for Santa Clara County for
$10,000,000. The road was completed in 2023. Information related to
the contract is as follows.
2018
2019
2020
Cost incurred during the year
$
2,044,000
$
2,628,000
$
2,890,800
Estimated costs to complete as of year-end
5,256,000
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0
Billings during the year
2,170,000
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Cash collections during the year
1,885,000
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5. Calculate the amount of revenue and...
In 2021, the Westgate Construction company entered into a contract to construct a road for Santa...
In 2021, the Westgate Construction company entered into a
contract to construct a road for Santa Clara County for
$10,000,000. The road was completed in 2023. Information related to
the contract is as follows.
2018
2019
2020
Cost incurred during the year
$
2,044,000
$
2,628,000
$
2,890,800
Estimated costs to complete as of year-end
5,256,000
2,628,000
0
Billings during the year
2,170,000
2,502,000
5,328,000
Cash collections during the year
1,885,000
2,600,000
5,515,000
3. Complete the information required below to...
in 2021, the Westgate Construction Company entered into a contract to construct a road for Santa...
in 2021, the Westgate Construction Company entered into
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$10,000,000. The road was completed in 2020. Information related to
the contract is as follows: 2018 2019 2020 Cost incurred during the
year $ 2,044,000 $ 2,628,000 $ 2,890,800 Estimated costs to
complete as of year-end 5,256,000 2,628,000 0 Billings during the
year 2,170,000 2,502,000 5,328,000 Cash collections during the year
1,885,000 2,600,000 5,515,000 Westgate recognizes revenue over time
according to...
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2021 2022 2023
Cost incurred during the year $1,840,000 $3,760,000
$4,500,000
Estimated costs to complete as of year-end $6,160,000 $5,600,000
$0
Billings during the year $3,000,000 $4,000,000 $5,000,000
Cash collections during thee year $2,600,000
$3,900,000 $5,100,000
a. Westgate recognizes revenue over time according to percentage
of completion....
In 2021, the Westgate Construction Company entered into a contract to construct a bridge for $12,000,000....
In 2021, the Westgate Construction Company entered into a
contract to construct a bridge for $12,000,000.
The bridge was completed in 2023. Information related to the
contract is as follows:
2021 2022 2023
Cost incurred during the year $1,840,000 $3,760,000
$4,500,000
Estimated costs to complete as of year-end $6,160,000 $5,600,000
$0
Billings during the year $3,000,000 $4,000,000 $5,000,000
Cash collections during thee year $2,600,000
$3,900,000 $5,100,000
a. Westgate recognizes revenue over time according to percentage
of completion....
In 2021, the Westgate Construction Company entered into a contract to construct a road for Santa...
In 2021, the Westgate Construction Company entered into a
contract to construct a road for Santa Clara County for
$10,000,000. The road was completed in 2023. Information related to
the contract is as follows:
2021
2022
2023
Cost incurred during the year
$
2,400,000
$
3,600,000
$
2,200,000
Estimated costs to complete as of year-end
5,600,000
2,000,000
0
Billings during the year
2,000,000
4,000,000
4,000,000
Cash collections during the year
1,800,000
3,600,000
4,600,000
Assume that Westgate Construction’s contract with Santa...
In 2021, the Westgate Construction Company entered into a contract to construct a road for Santa...
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contract to construct a road for Santa Clara County for
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2022
2023
Cost incurred during the year
$
2,490,000
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2,008,600
Estimated costs to complete as of year-end
5,810,000
1,826,000
0
Billings during the year
2,030,000
4,444,000
3,526,000
Cash collections during the year
1,815,000
3,900,000
4,285,000
Westgate recognizes revenue over time according to...
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