Problem 40

Contract LO6 Briet Exercise 7-40 A wholesaler enters into a contract with a retailer to sell 5,000 distinct items of merchandise for $25,00 dentilying a Contract per Wegricaton CLot per item) over a 12-month period. The parties to the contract modify the agreement after 6 months to sell,an an ad ditional 200 items for $60 each. The $60 per unit price of the additional items represents the standalone price of these items on the date of the modification Would the change to the agreement be accounted for as (1) a new separate contract with no original contract or (2) a new contract after termihating the original contract? Would the answer to part a change if the $60 per unit price for the additional distinct items did not the standalone selling price? a. b. Brief Exercise 7-41 Match each of the contract modifications a to c with the proper accounting treatmen Treatment for Contract Accounting treatment Modifications LO7 1. New separate contract with no change to original contract 2. 3. Termination of original contract and creation of a new combined contract Cumulative catch-up adjustment with no new contract