AC 302 WEEK 1 Exercise 18A 9

AC 302 WEEK 1 Exercise 18A 9
Sanchez Co. enters into a contract to sell Product A and Product B on January 2, 2014, for an upfront cash payment of $168,000. Product A will be delivered in 2 years (January 2, 2016) and Product B will be delivered in 5 years (January 2, 2019). Sanchez Co. allocates the $168,000 to Products A and B on a relative standalone selling price basis as follows.
		Standalone
Selling Prices		Percent
Allocated		Allocated
Amounts	
Product A			$	44,800			25%			$	42,000		
Product B				134,400			75%				126,000		
			$	179,200						$	168,000		

Sanchez Co. uses an interest rate of 6%, which is its incremental borrowing rate.

(Hint: Given the (discounted) upfront payment, accretion of the contract liability will need to be recorded.)

Prepare the journal entries necessary on January 2, 2014, and December 31, 2014. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.)
Date	Account Titles and Explanation	Debit	Credit
January 2, 2014	  
  
  

	  
  
  

	(To record upfront payment for sales of products A and B)		
December 31, 2014	  
  
  

	  
  
  

	(To record interest on the contract liability (Unearned Sales Revenue))		



Show List of Accounts

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 	Prepare the journal entries necessary on December 31, 2015. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.)
Date	Account Titles and Explanation	Debit	Credit
December 31, 2015	  
  
  

	  
  
  

	(To record interest on the contract liability)		




Show List of Accounts

Link to Text
			


	 
 
 	Prepare the journal entries necessary on January 2, 2016. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.)
Date	Account Titles and Explanation	Debit	Credit
January 2, 2016	  
  
  

	  
  
  

	(To record revenue on transfer of product A)		
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