Prepare all journal entries and adjusting journal entries for 2022 for Zara University Contract o On...
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Prepare all journal entries and adjusting journal entries for 2022 for Zara University Contract o On December 1, PP signed a contract with Zara University to provide them with 905 scooters, at a price of $655 each. Zara University chose not to purchase the additional maintenance service. Because PP had a great sales year, they did not have any scooters in stock on December 1. Zara University offered a bonus plan for early delivery. o o They will pay a 4% bonus if all scooters are delivered by the end of January, 3% if all scooters are delivered by the end of February, and 2% if all scooters are delivered by the end of March. o It believes that it is 45% likely that it can deliver the remaining scooters in January, 40% likely that it will deliver them in February, 10% likely that it will deliver them in March, and 5% likely it will deliver them in April. o PP delivered and was paid for 195 scooters during the month of December. o Hint: Consider using the "Estimated Bonus" account. o See below the analysis of the first four steps of the revenue recognition process: Zara University Contract: Contract Price: Units Price Contract Price Step 1: Step 2: Step 3: Delivery date January February March Later 905 655 592,775 Step 4: Contract exists Only 1 performance obligation Determine the transaction price - variable consideration Bonus Consideration Probability 4% 3% 2% 0% It is 55% likely that the revenue will be reversed, so it is constrained. Transaction Price (constrained) Transaction Price per scooter Estimated Bonus per scooter 616,486 610,558 604,631 592,775 610,558 674.65 19.65 45% 40% 10% 5% 100% 277,419 244,223 60,463 29,639 611,744 Only 1 performance obligation, so no allocation Prepare all journal entries and adjusting journal entries for 2022 for Zara University Contract o On December 1, PP signed a contract with Zara University to provide them with 905 scooters, at a price of $655 each. Zara University chose not to purchase the additional maintenance service. Because PP had a great sales year, they did not have any scooters in stock on December 1. Zara University offered a bonus plan for early delivery. o o They will pay a 4% bonus if all scooters are delivered by the end of January, 3% if all scooters are delivered by the end of February, and 2% if all scooters are delivered by the end of March. o It believes that it is 45% likely that it can deliver the remaining scooters in January, 40% likely that it will deliver them in February, 10% likely that it will deliver them in March, and 5% likely it will deliver them in April. o PP delivered and was paid for 195 scooters during the month of December. o Hint: Consider using the "Estimated Bonus" account. o See below the analysis of the first four steps of the revenue recognition process: Zara University Contract: Contract Price: Units Price Contract Price Step 1: Step 2: Step 3: Delivery date January February March Later 905 655 592,775 Step 4: Contract exists Only 1 performance obligation Determine the transaction price - variable consideration Bonus Consideration Probability 4% 3% 2% 0% It is 55% likely that the revenue will be reversed, so it is constrained. Transaction Price (constrained) Transaction Price per scooter Estimated Bonus per scooter 616,486 610,558 604,631 592,775 610,558 674.65 19.65 45% 40% 10% 5% 100% 277,419 244,223 60,463 29,639 611,744 Only 1 performance obligation, so no allocation
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Related Book For
Intermediate Accounting
ISBN: 978-0470161012
9th Canadian Edition, Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield.
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