Answered: contract price of $48,000

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 2P: JustKitchens Inc. provides services to restaurants and hotels. The company supplies paper products,...

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1. Clean & Clear Water offers pool and spa cleaning services to hotels and residential customers. Commercial (hotels) customers pay on a monthly contract basis, while residential customers pay an hourly rate based on services provided. In July 2019, Clean & Clear Water signed a 6-month contract with Travel Holidays to provide pool and spa cleaning services for 3 hotel sites. The contract price of $48,000 was collected on July 1, 2019. The services will be provided evenly over the 6 months. During July 2019, Clean & Clear Water also provided 80 hours of residential pool services at $30 per hour. These services have not yet been billed to residential customers. The company uses the account, Fees Receivable, to reflect amounts due but not yet billed.

a. Prepare the entry on July 1, 2019 to record the receipt of $48,000 cash related to the contract with Travel Holidays.

b. Prepare the adjusting entry to be made on July 31, 2019 for the contract work performed for Travel Holidays during the month.

c. Prepare the adjusting entry needed on July 31, 2019 to reflect the residential pool services performed during the month.

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