N11.Account Recording Revenue Under a Contract ModificationTraders Inc. enters into a three-year office maintenance contract with its customer for $588,000 ($196,000 per year).$196,000 per year is the standalone selling price for one year of maintenance service. At the end of the second year, bothparties agree to modify the maintenance contract as follows: (1) the fee for the third year is reduced to $154,000, and (2)the contract is extended for an additional two years for $280,000 ($140,000 per year). The standalone selling price forone year of service at the time of modification is $168,000. Maintenance fees are billed annually by Traders Inc.Answer the following questioins, rounding each answer to the nearest whole dollar.a. Record Traders Inc.'s journal entry to recognize revenue for each of the first two years of the contract. Assume that thecontract price was paid in cash.Account NameCashAccounts ReceivableDue from Consigneelnventory Prepaid ExpenseContract Asset Prepaid AdvertisingExpenseAccounts PayableConsideration PayableDeferred RevenueSales RevenueService RevenueCommissionRevenueCost of Goods SoldAdvertising Expenselnterest ExpenseSales Commission ExpenseN/ACashAccounts ReceivableDue from Consigneelnventory Prepaid ExpenseContract Asset Prepaid AdvertisingExpenseAccounts PayableConsideration PayableDeferred RevenueSales RevenueService RevenueCommissionRevenueCost of Goods SoldAdvertising Expenselnterest ExpenseSales Commission ExpenseN/AYear one entry.CashAccounts ReceivableDue from Consigneelnventory Prepaid ExpenseContract Asset Prepaid AdvertisingExpenseAccounts PayableConsideration PayableDeferred RevenueSales RevenueService RevenueCommissionRevenueCost of Goods SoldAdvertising Expenselnterest ExpenseSales Commission ExpenseN/ACashAccounts ReceivableDue from Consigneelnventory Prepaid Expense Contract AssetPrepaid AdvertisingExpenseAccounts PayableConsideration Payable Deferred RevenueSales RevenueService RevenueCommissionRevenueCost of goods SoldAdvertising Expenselnterest ExpenseSales Commission ExpenseN/AYear two entry.b. Record Traders Inc.'s journal entry to recognize revenue for each of the years three through five of the contract, takinginto account the contract modification.Account NameCashAccounts ReceivableDue from Consigneelnventory Prepaid ExpenseContract Asset Prepaid AdvertisingExpenseAccounts PayableConsideration Payable Deferred RevenueSales RevenueService RevenueCommissionRevenueCost of Goods SoldAdvertising Expenselnterest ExpenseSales Commission ExpenseN/ADr.Cr.CashAccounts ReceivableDue from Consigneelnventory Prepaid ExpenseContract AssetPrepaid AdvertisingExpenseAccounts PayableConsideration PayableDeferred RevenueSales RevenueService RevenueCommissionRevenueCost of Goods SoldAdvertising Expenselnterest ExpenseSales Commission ExpenseN/AYear three through year five entry.Dr.Cr.

These entries recognize the revenue earned by Traders Inc. for each year of the contract. The…

Recording Revenue Under a Contract Modification Traders Inc. enters into a three-year office maintenance contract with its custom $196,000 per year is the standalone selling price for one year of maintenance se parties agree to modify the maintenance contract as follows: (1) the fee for the t the contract is extended for an additional two years for $280,000 ($140,000 per one year of service at the time of modification is $168,000. Maintenance fees ar

Recording Revenue Under a Contract Modification Traders Inc. enters into a three-year office maintenance contract with its custom $196,000 per year is the standalone selling price for one year of maintenance se parties agree to modify the maintenance contract as follows: (1) the fee for the t the contract is extended for an additional two years for $280,000 ($140,000 per one year of service at the time of modification is $168,000. Maintenance fees ar

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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