On 1 July 2022, Entity A entered into Contract X with a customer, Entity B, to sell Product A for $450 per unit. If Entity B purchases more than 800 units of Product A in a 12-month period, Contract X specifies that the price will be reduced to $390 per unit. Entity B agreed to settle all outstanding amounts of Contract X in July 2023 after both Entities agreed on the total units of sales on 30 June 2023. For the quarter that ended 30 September 2022, Entity A sold 216 units of Product A to Entity B. At that date, Entity A concluded that Entity B's purchases would not exceed the 800 units threshold required for the volume discount. In October 2022, Entity B acquired another production unit which increased the demand for Product A from Entity A. On 30 November 2022, Entity B ordered an additional 581 units of Product A from Entity A. In light of this, Entity A concluded that the customer's purchases are now highly likely to exceed the 800 units threshold in the 12 months to 30 June 2023. On 15 December 2022, Entity A transferred the 581 units of Product A to Entity B. On 31 March 2023, Entity A sold another 2 units of Product A to Entity B. On 30 June 2023, Entity B and Entity A agreed on the total units of sales from 1 July 2022 to 30 June 2023. On 5 July 2023, Entity B settled all the outstanding amounts of Contract X with Entity A under the terms of Contract X. The cost of Product A Is $245 per unit. The end of the reporting period of Entity A is 30 June
On 1 July 2022, Entity A entered into Contract X with a customer, Entity B, to sell Product A for $450 per unit. If Entity B purchases more than 800 units of Product A in a 12-month period, Contract X specifies that the price will be reduced to $390 per unit. Entity B agreed to settle all outstanding amounts of Contract X in July 2023 after both Entities agreed on the total units of sales on 30 June 2023. For the quarter that ended 30 September 2022, Entity A sold 216 units of Product A to Entity B. At that date, Entity A concluded that Entity B's purchases would not exceed the 800 units threshold required for the volume discount. In October 2022, Entity B acquired another production unit which increased the demand for Product A from Entity A. On 30 November 2022, Entity B ordered an additional 581 units of Product A from Entity A. In light of this, Entity A concluded that the customer's purchases are now highly likely to exceed the 800 units threshold in the 12 months to 30 June 2023. On 15 December 2022, Entity A transferred the 581 units of Product A to Entity B. On 31 March 2023, Entity A sold another 2 units of Product A to Entity B. On 30 June 2023, Entity B and Entity A agreed on the total units of sales from 1 July 2022 to 30 June 2023. On 5 July 2023, Entity B settled all the outstanding amounts of Contract X with Entity A under the terms of Contract X. The cost of Product A Is $245 per unit. The end of the reporting period of Entity A is 30 June
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On 1 July 2022, Entity A entered into Contract X with a customer, Entity B, to sell Product A for $450 per unit.
If Entity B purchases more than 800 units of Product A in a 12-month period, Contract X specifies that the price will be reduced to $390 per unit.
Entity B agreed to settle all outstanding amounts of Contract X in July 2023 after both Entities agreed on the total units of sales on 30 June 2023.
For the quarter that ended 30 September 2022, Entity A sold 216 units of Product A to Entity B. At that date, Entity A concluded that Entity B's purchases would not exceed the 800
units threshold required for the volume discount.
In October 2022, Entity B acquired another production unit which increased the demand for Product A from Entity A.
On 30 November 2022, Entity B ordered an additional 581 units of Product A from Entity A. In light of this, Entity A concluded that the customer's purchases are now highly likely to
exceed the 800 units threshold in the 12 months to 30 June 2023.
On 15 December 2022, Entity A transferred the 581 units of Product A to Entity B.
On 31 March 2023, Entity A sold another 2 units of Product A to Entity B.
On 30 June 2023, Entity B and Entity A agreed on the total units of sales from 1 July 2022 to 30 June 2023.
On 5 July 2023, Entity B settled all the outstanding amounts of Contract X with Entity A under the terms of Contract X. The cost of Product A Is $245 per unit.
The end of the reporting period of Entity A is 30 June.
REQUIRED:
Provide journal entries for Entity A from 1 July 2022 to 5 July 2023 under relevant accounting standards.
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