On May 1, 2024, Meta Computer, Incorporated, enters into a contract to sell 6,000 units of Comfort Office Keyboard to one of its clients, Bionics, Incorporated, at a fixed price of $106,800, to be settled by a cash payment on May 1. Delivery is scheduled for June 1, 2024. As part of the contract, the seller offers a 25% discount coupon to Bionics for any purchases in the next six months. The seller will continue to offer a 5% discount on all sales during the same time period, which will be available to all customers. Based on experience, Meta Computer estimates a 50% probability that Bionics will redeem the 25% discount voucher and that the coupon will be applied to $12,000 of purchases. The stand-alone selling price for the Comfort Office Keyboard is $19.80 per unit. Required: 1. How many performance obligations are in this contract? 2. Prepare the journal entry that Meta would record on May 1, 2024. 3. Assume the same facts and circumstances as above, except that Meta gives a 5% discount option to Bionics instead of 25%. In this case, what journal entry would Meta record on May 1, 2024?

On May 1, 2024, Meta Computer, Incorporated, enters into a contract to sell 6,000 units of Comfort Office Keyboard to one of its clients, Bionics, Incorporated, at a fixed price of $106,800, to be settled by a cash payment on May 1. Delivery is scheduled for June 1, 2024. As part of the contract, the seller offers a 25% discount coupon to Bionics for any purchases in the next six months. The seller will continue to offer a 5% discount on all sales during the same time period, which will be available to all customers. Based on experience, Meta Computer estimates a 50% probability that Bionics will redeem the 25% discount voucher and that the coupon will be applied to $12,000 of purchases. The stand-alone selling price for the Comfort Office Keyboard is $19.80 per unit. Required: 1. How many performance obligations are in this contract? 2. Prepare the journal entry that Meta would record on May 1, 2024. 3. Assume the same facts and circumstances as above, except that Meta gives a 5% discount option to Bionics instead of 25%. In this case, what journal entry would Meta record on May 1, 2024?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Contract Costing

Contract costing is about tracing particular costs related to a particular contract entered into with the customer. It is one of the forms of job order costing. It is useful in long-term contracts at the most. It is seen that substantial time is required for the completion of the contract which takes different accounting periods. Thus, it is very much helpful for recognizing the costs associated with it and accounting in their specific accounting periods.

Question

On May 1, 2024, Meta Computer, Incorporated, enters into a contract to sell 6,000 units of Comfort Office Keyboard to one of its
clients, Bionics, Incorporated, at a fixed price of $106,800, to be settled by a cash payment on May 1. Delivery is scheduled for June 1,
2024. As part of the contract, the seller offers a 25% discount coupon to Bionics for any purchases in the next six months. The seller
will continue to offer a 5% discount on all sales during the same time period, which will be available to all customers. Based on
experience, Meta Computer estimates a 50% probability that Bionics will redeem the 25% discount voucher and that the coupon will
be applied to $12,000 of purchases. The stand-alone selling price for the Comfort Office Keyboard is $19.80 per unit.
Required:
1. How many performance obligations are in this contract?
2. Prepare the journal entry that Meta would record on May 1, 2024.
3. Assume the same facts and circumstances as above, except that Meta gives a 5% discount option to Bionics instead of 25%. In
this case, what journal entry would Meta record on May 1, 2024?
Complete this question by entering your answers in the tabs below.
Required 1 Required 2 Required 3
How many performance obligations are in this contract?
Number of performance obligations
< Required 1
Required 2 >

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