Chapter 5, Problem 5.5E

Requirement – 1

To determine

Performance obligation:

Performance obligation is the promise made by the seller to supply the goods and service to the customer on or before the contract.

Transaction price:

Transaction price refers to the price that is paid at the time of delivery or after delivery of goods and/or services. Specific situations affecting the transaction price are as follows:

• Variable amount of consideration and the restriction on its recognition.
• Rights for sales return
• Whether the seller is acting as a principal or an agent
• Time value of money
• Payments by the seller to the customer.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

• Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
• Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To determine: The number of performance obligations exist in the contract.

Requirement – 2

To determine

To prepare: The journal entry for Gold examiner would record on March 1.

Requirement – 3

To determine

To prepare: The journal entry for Gold examiner would record on March 30.

Requirement – 4

To determine

To prepare: The journal entry for Gold examiner would record on April 1.