On September 1, 20x4 Bobcat Coffee purchased 120 units of it's first custom expresso machines for...

On September 1, 20x4 Bobcat Coffee purchased 120 units of it's first custom expresso machines for resale. The cost of the machines were $100 per machine.

In 20x4, Bobcat Coffee offers a special deal to it's customers. It offers its custom expresso machine and a 1 year subscription to it's creative coffee drinks app for $700. Note the machine sells on it's on for $600 and the normal cost of subscription app is $250. There is not right of return on either piece.

a. November 1, 20x4, Bobcat enters into a sales agreement to sell 100 package deals, with a start date of December 1, to Ohio Coffee. Ohio Coffee agrees to pay a 10% down pmt of the contract, the balance due 30 days after delivery of the machines.

b. December 1, 20x4: Bobcat delivers the 100 Machines to Ohio Coffee.

c. December 31, 20x4: Bobcats closes the books for the fiscal year.

journal Entries

20x4 a; b, c

Expert Solution

Price of one package deal = $700

Down payment = $700 x 100 x 10% = $7,000

When there is multiple obligations on a single contract. Sales price is fixed on proportion to its standalobne price

Price of Coffee machine = $600/$800 x $750 = $562.5

Price of Subscription app = $200/$800 x $750 = $187.5

Further revenue is recognised only on completion of performance obligation.So for sale the relevant date is upon delivery. For the Subscription it is recognised proportionately.

Revenue to be recognised during 20x4 = ($187.5 x 100) / 12 x 1 = $1,562.50

Date		Debit	Credit
1 Nov 20x4	Cash	$ 7,000.00
	Customer deposit		$ 7,000.00

1 Dec 20x4	Customer deposit	$ 7,000.00
	Accounts Receivable	$ 49,250.00
	Sales Revenue		$ 56,250.00

31 Dec 20x4	Accounts Receivable	$ 1,562.50
	Sales Revenue		$ 1,562.50

ekkarill92 answered 2 years ago

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