On June 1, 2020, Forde Auto Manufacturer sells a 4-door sedan to a dealer for $102,000, which includes three years of maintenance. The standalone selling price of the vehicle is $102,000 and the standalone selling price of the maintenance contract is $6,800. In addition, Forde offered a $1,700 cash incentive (per vehicle purchased) to the dealer if the vehicle was purchased in the first week of June 2020. a. How should the transaction price be allocated among the performance obligation(s) for sales made in the first week of June? b. Prepare Forde’s journal entry to record the sale of vehicles for cash, assuming that dealers purchased 20 vehicles during the first week of June 2020. Ignore the cost of sales entries. Note: If a journal entry (or a line of the journal entry) isn't required for the transaction, select "N/A" as the account name and leave the Dr. and Cr. answers blank (zero). Note: Round each allocated transaction price in the table below to the nearest dollar. a. Performance Obligations Transaction Price as Stated Standalone Selling Price Allocated Transaction Price (rounded) Vehicle Answer Answer Answer Maintenance agreement Answer Answer Answer Answer Answer Answer b. Account Name Dr. Cr. AnswerCashAccounts ReceivableDue from ConsigneeInventoryPrepaid expenseContract AssetPrepaid Advertising ExpenseAccounts PayableConsideration PayableDeferred Revenue—Maintenance AgreementSales RevenueService RevenueCommission RevenueCost of Goods SoldAdvertising ExpenseInterest ExpenseSales Commission ExpenseN/A Answer Answer Sales Revenue-Vehicles Answer Answer AnswerCashAccounts ReceivableDue from ConsigneeInventoryPrepaid expenseContract AssetPrepaid Advertising ExpenseAccounts PayableConsideration PayableDeferred Revenue—Maintenance AgreementSales RevenueService RevenueCommission RevenueCost of Goods SoldAdvertising ExpenseInterest ExpenseSales Commission ExpenseN/A

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Allocating Transaction Price to Performance Obligations and Recording Sales

On June 1, 2020, Forde Auto Manufacturer sells a 4-door sedan to a dealer for $102,000, which includes three years of maintenance. The standalone selling price of the vehicle is $102,000 and the standalone selling price of the maintenance contract is $6,800. In addition, Forde offered a $1,700 cash incentive (per vehicle purchased) to the dealer if the vehicle was purchased in the first week of June 2020.

a. How should the transaction price be allocated among the performance obligation(s) for sales made in the first week of June?
b. Prepare Forde’s journal entry to record the sale of vehicles for cash, assuming that dealers purchased 20 vehicles during the first week of June 2020. Ignore the cost of sales entries.

Note: If a journal entry (or a line of the journal entry) isn't required for the transaction, select "N/A" as the account name and leave the Dr. and Cr. answers blank (zero).
Note: Round each allocated transaction price in the table below to the nearest dollar.

Performance Obligations	Transaction Price as Stated	Standalone Selling Price	Allocated Transaction Price (rounded)
Vehicle	Answer	Answer	Answer
Maintenance agreement	Answer	Answer	Answer
	Answer	Answer	Answer

Account Name	Dr.	Cr.
AnswerCashAccounts ReceivableDue from ConsigneeInventoryPrepaid expenseContract AssetPrepaid Advertising ExpenseAccounts PayableConsideration PayableDeferred Revenue—Maintenance AgreementSales RevenueService RevenueCommission RevenueCost of Goods SoldAdvertising ExpenseInterest ExpenseSales Commission ExpenseN/A	Answer	Answer
Sales Revenue-Vehicles	Answer	Answer
AnswerCashAccounts ReceivableDue from ConsigneeInventoryPrepaid expenseContract AssetPrepaid Advertising ExpenseAccounts PayableConsideration PayableDeferred Revenue—Maintenance AgreementSales RevenueService RevenueCommission RevenueCost of Goods SoldAdvertising ExpenseInterest ExpenseSales Commission ExpenseN/A	Answer	Answer

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