On January 1, 2017, ForeRunner Inc. enters into a contract with a sporting goods company to provide 100 GPS enabled watches for $ 25,000 ($ 250 per watch) over the next 6 months. On April 1, 2017, when 80 of the watches have been delivered, the contract is modified.
Required:
1. Assume 30, 20, and 30 watches were delivered in January, February, and March, respectively. Prepare Fore Runner’s journal entries to record revenue for each of these months.
2. Assume the contract is modified to include an additional 40 watches at $ 205 per watch, which is the standalone selling price on April 1, 2017. Assume that 20 watches are sold to the sporting goods company in April, May and June. Prepare the journal entries to record the watch sales in April, May and June.
3. Assume the contract is modified to include an additional 40 watches at $ 205 per watch, which does not represent the stand alone selling price on April 1, 2017. Assume that 20 watches are sold to the sporting goods company in April, May and June. Prepare the journal entries to record the watch sales in April, May and June.
4. Assume that the contract is modified to reduce the price of the remaining 20 watches from the original order of 100 watches to $ 205 per watch, which is significantly lower than the stand alone selling price on April 1, 2017. Assume 10, 5, and 5 watches are sold in April, May, and June, respectively. Prepare the journal entries to record the watch sales in April, May and June.