Question

On March 1, 2021, Gold Examiner receives $154,000 from a local bank and promises to deliver 95 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 $1,520 per unit, and Gold Examiner estimates the stand-alone price of the replacement insurance service to be $80 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. to 4. Prepare the journal entry Gold Examiner would record on March 1, March 30 and April 1. Complete this question by entering your answers in the tabs below. Req 1 Req 2 to 4 How many performance obligations are in this contract? Number of performance obligations Req 2 to 4 >

Answer 1

1
Number of performance obligations in the contract is 2.
2
		Debit	Credit
March 01, 2021	Cash	154000
	Deferred revenue—gold bars		146300
	Deferred revenue—insurance		7700
March 30, 2021	Deferred revenue—gold bars	146300
	Sales revenue		146300
Apirl 01, 2021	Deferred revenue—insurance	7700
	Service revenue		7700
	Workings:
	Value of the gold bars	144400		=1520*95
	Stand­alone selling price of the insurance	7600		=80*95
	Total of stand­alone prices	152000
	Allocation:
	Deferred revenue—gold bars	146300		=154000*144400/152000
	Deferred revenue—insurance	7700		=154000*7600/152000