Recording and Reporting Customer Advances Manchester Co. operates as a manufacturer of industrial equipment. On March 28, Manchester Co. received an advance payment of $260,000 from a customer on a special order of equipment. On May 1, Manchester Co. prepared an invoice and delivered the equipment to the customer. Total sales price is $1,040,000 and the remaining balance is due upon delivery of the equipment. Required a. Record the entry on March 28 for Manchester Co.'s receipt of the advance payment. b. Indicate how the payment would be reported on Manchester's March 31 financial statements. Ignore the cash account. c. Record the entry on May 1 for the sale of the equipment assuming that the advance payment was applied to the balance due. Ignore the cost of goods sold entry.
Recording and Reporting Customer Advances Manchester Co. operates as a manufacturer of industrial equipment. On March 28, Manchester Co. received an advance payment of $260,000 from a customer on a special order of equipment. On May 1, Manchester Co. prepared an invoice and delivered the equipment to the customer. Total sales price is $1,040,000 and the remaining balance is due upon delivery of the equipment. Required a. Record the entry on March 28 for Manchester Co.'s receipt of the advance payment. b. Indicate how the payment would be reported on Manchester's March 31 financial statements. Ignore the cash account. c. Record the entry on May 1 for the sale of the equipment assuming that the advance payment was applied to the balance due. Ignore the cost of goods sold entry.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Recording and Reporting Customer Advances
Manchester Co. operates as a manufacturer of industrial equipment. On March 28, Manchester Co. received an advance payment of
$260,000 from a customer on a special order of equipment. On May 1, Manchester Co. prepared an invoice and delivered the
equipment to the customer. Total sales price is $1,040,000 and the remaining balance is due upon delivery of the equipment.
Required
a. Record the entry on March 28 for Manchester Co.'s receipt of the advance payment.
b. Indicate how the payment would be reported on Manchester's March 31 financial statements. Ignore the cash account.
c. Record the entry on May 1 for the sale of the equipment assuming that the advance payment was applied to the balance due. Ignore
the cost of goods sold entry.
Date
Account Name
a. Mar. 28 Cash
Accounts Receivable
To record receipt of advanced payment
b.
Balance Sheet
Current liabilities
Accounts Payable
March 31
0x
Dr.
Cr.
0
0x
0
0x
Date
Account Name
Dr.
Cr.
c. May 1 Inventory
0
0%
Accounts Receivable
0
0%
0
0x
Cash
To record sales revenue.
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