Question

On March 1, 2018, Gold Examiner receives $165,000 from a local bank and promises to deliver 100 units of certified 1-oz. gold bars on a future date. The contract states that ownership passes to the bank when Gold Examiner delivers the products to Brink’s, a third-party carrier. In addition, Gold Examiner has agreed to provide a replacement shipment at no additional cost if the product is lost in transit. The stand-alone price of a gold bar is $1,410 per unit, and Gold Examiner estimates the stand-alone price of the replacement insurance service to be $90 per unit. Brink’s picked up the gold bars from Gold Examiner on March 30, and delivery to the bank occurred on April 1. Required: 1. How many performance obligations are in this contract? 2. Prepare the journal entry Gold Examiner would record on March 1, March 30 and April 1.

Answer 1

there are two performance:

the sales revenue and the insurance.

cash 165,000 debit

unearned revenues 165,000 credit

--to record collectiong from local bank

unearned revenues 165,000 debit

sales revenues 151,000 credit

insurance liability 9,900 credit

--to record gold delivered to Brink's--

insurance liability 9,900 debit

insurance fees earned 9,900 credit

--to record reception of bank from Brink/end of the insurance--

Step-by-step explanation:

sales revenue

100 x 1,410 = 141,000 = 94%

insurance:

100 x 90 = 9,000 = 6%

total 150,000

combo: 165,000

sales revenue: 165,000 x 94% = 155,100

insurance fee earned: 165,000 x 6% = 9,900