Answer: b. $500,000
Explanation:
Sold 200,000 widgetrons to Cavanaugh Corp at $5 per unit.
Paid initial 40% of the total value which is 200,000 x $5 = $1,000,000 x 40% = $400,000
Bal on the sales contract is $600,000
agreed to pay the rest in equal installments on the two delivery dates.
November 15, half of $600,00 was paid upon delivery which is $300,000
What value shd be recognised in the books for year 8
= value of goods delivered is 100,000 x $5 = $500,000
$500,000 would be recognised in the books of Coloson as sales for the year 8 and the balance of cash received will be posted to unearned income account for the year.
Answer: The answer is b. $500,000
Explanation:
Colson Corp. sold 200,000 widgetrons to Cavanaugh Corp. at $5 per unit, but Cavanaugh Corp. made an initial payment of 40% of the total value which is $400,000 calculated as follows:
200,000 x $5 = $1,000,000
40% of $1,000,000 = $400,000
Therefore, the bal on the sales contract will be:
$1,000,000 - $400,000 = $600,000
Cavanaugh Corp. agreed to pay the balance in equal installments on two different delivery dates.
The supposed value that should be recognised in the books for year 8 is $500,000 calculated as follows:
Goods delivered is 100,000
Unit price is $5
100,000 x $5 = $500,000
Therefore, $500,000 should be recognised in revenue for Colson.
