CHapter 4 Flashcards
Address each point in regards to Rights Under the Contract:
Company enters into a contract with a customer
Company provides goods or services to customer
Company invoices customer for goods or services
Customer pays
No change (because neither party has done anything aside from signing the contract)
Increases (because it increases the company’s rights)
No change (because it does not change the extent of responsibilities under contract)
Decreases (because it decreases the company’s rights)
Address each in terms of Performance obligations under the contract:
Company enters into a contract with a customer
Company provides goods or services to customer
Company invoices customer for goods or services
Customer pays
No change (because neither party has done anything aside from signing the contract)
Decreases (because it reduces the company’s obligations)
No change (because it does not change the extent of responsibilities under contract)
No change (because all obligations were already met)
Address each in terms of Net Contract Position Required Journal Entry:
Company enters into a contract with a customer
Company provides goods or services to customer
Company invoices customer for goods or services
Customer pays
No change
No journal entry to record.
Increases; therefore, recognize revenue DR Accounts Receivable CR Sales Revenue If sale of goods, then also DR Cost of Goods Sold CR Inventory
No change
No journal entry to record
Decreases
DR Cash
CR Accounts Receivable
