On May 1, 2018, Meta Computer, Inc., enters into a contract to sell 5,000 units of Comfort Office Keyboard to one of its clients, Bionics, Inc., at a fixed price of $95,000, to be settled by a cash payment on May 1. Delivery is scheduled for June 1, 2018. As part of the contract, the seller offers a 25% discount coupon to Bionics for any purchases in the next six months. The seller will continue to offer a 5% discount on all sales during the same time period, which will be available to all customers. Based on experience, Meta Computer estimates a 50% probability that Bionics will redeem the 25% discount voucher, and that the coupon will be applied to $20,000 of purchases. The stand-alone selling price for the Comfort Office Keyboard is $19.60 per unit.

Question

Business

Phoebe Acevedo

15 December, 09:04

On May 1, 2018, Meta Computer, Inc., enters into a contract to sell 5,000 units of Comfort Office Keyboard to one of its clients, Bionics, Inc., at a fixed price of $95,000, to be settled by a cash payment on May 1. Delivery is scheduled for June 1, 2018. As part of the contract, the seller offers a 25% discount coupon to Bionics for any purchases in the next six months. The seller will continue to offer a 5% discount on all sales during the same time period, which will be available to all customers. Based on experience, Meta Computer estimates a 50% probability that Bionics will redeem the 25% discount voucher, and that the coupon will be applied to $20,000 of purchases. The stand-alone selling price for the Comfort Office Keyboard is $19.60 per unit.

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Madalynn Cook · Answer 1

Journal entries

Explanation:

1. There are two performance obligations in this contract

2. The journal entry is as follows

Cash Dr $95,000

To Unearned sales revenue $93,100

To Unearned discount sales revenue $1,900

(Being the unearned revenue is recorded)

The computation of the unearned discount sales revenue is shown below:

= $95,000 * $2,000 : $100,000

= $1,900

The $2,000 is come from

= $20,000 * (25% - 5%) * 50%

= $2,000

And, the $100,000 is come from i. e sales revenue including discount

= $98,000 + ($20,000 * 20% * 50%)

=$100,000

And, $98,000 is come from i. e sales revenue

= 5,000 units * $19.60 per unit

= $98,000

3. And, the journal entry is as follows

Cash Dr $95,000

To Unearned sales revenue $95,000

(Being the unearned sales revenue is recorded)