E18-17B (L04) (Contract Modification) In September 2017, Fernetti Corp. commits to selling 200 of its...
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E18-17B (L04) (Contract Modification) In September 2017, Fernetti Corp. commits to selling 200 of its iPhone-compatible docking stations to Remington Co. for $20,000 ($100 per product). The stations are delivered to Remington over the next 6 months. After 120 stations are delivered, the contract is modified and Fernetti promises to deliver an additional 60 products for an additional $5,700 ($95 per station). All sales are cash on delivery.
Instructions
(a) Prepare the journal entry for Fernetti for the sale of the first 120 stations. The cost of each station is $70.
(b) Prepare the journal entry for the sale of 12 more stations after the contract modification, assuming that the price for the additional stations reflects the standalone selling price at the time of the contract modification. In addition, the addi-
tional stations are distinct from the original products as Fernetti regularly sells the products separately.
(c) Prepare the journal entry for the sale of 12 more stations (as in (b)), assuming that the pricing for the additional products
does not reflect the standalone selling price of the additional products and the prospective method is used.
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