On January 1, 2020, Carly Fashions Inc. enters into a contract with a regional retail company to provide 500 blouses for $20,000 over the next 10 months. On September 1, 2020, after 400 of the blouses had been delivered (50 blouses per month), the contract is modified. Required: a. Fifty blouses were delivered each month for the first 8 months of 2020. Prepare Carly Fashions’s monthly journal entry to record revenue. For grading purposes use August 31 to date the entry that would be made each month. b. Assume that the contract is modified on September 1 to sell, once the original 500 blouses are delivered, an additional 100 blouses at $35 per blouse, which is the stand-alone selling price on October 1, 2020. The additional blouses are to be delivered in November. Prepare the November journal entry to record the contract modification. For grading purposes use November 30 to date the entry. c. Assume instead that the contract is modified on September 1 to alter the price of the additional 100 blouses to $35 per blouse, which is the stand-alone selling price on October 1, 2020. Assume the blouses are delivered evenly on September 1 and October 1, 2020. Prepare the journal entries for September and October to record this contract modification for September 1 and October 1.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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On January 1, 2020, Carly Fashions Inc. enters into a contract with a regional retail company to provide 500 blouses for $20,000 over the next 10 months. On September 1, 2020, after 400 of the blouses had been delivered (50 blouses per month), the contract is modified.

Required:

a.	Fifty blouses were delivered each month for the first 8 months of 2020. Prepare Carly Fashions’s monthly journal entry to record revenue. For grading purposes use August 31 to date the entry that would be made each month.
b.	Assume that the contract is modified on September 1 to sell, once the original 500 blouses are delivered, an additional 100 blouses at $35 per blouse, which is the stand-alone selling price on October 1, 2020. The additional blouses are to be delivered in November. Prepare the November journal entry to record the contract modification. For grading purposes use November 30 to date the entry.
c.	Assume instead that the contract is modified on September 1 to alter the price of the additional 100 blouses to $35 per blouse, which is the stand-alone selling price on October 1, 2020. Assume the blouses are delivered evenly on September 1 and October 1, 2020. Prepare the journal entries for September and October to record this contract modification for September 1 and October 1.

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