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Prepare the journal entries necessary on December

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Reference no: EM132906308

Question - Kristel Co. enters into a contract to sell Product A and Product B on January 2, 20x5, for an upfront cash payment of $300,000. Product A will be delivered in 2 years (January 2, 20x7) and Product B will be delivered in 5 years (January 2, 2020). Kristel Co. allocates the $300,000 to Products A and B on a relative standalone selling price basis as follows:

Standalone Selling Prices Percent Allocated Amounts Allocated

Product A $80,000 25% $75,000

Product B 240,000 75% 225,000

$320,000 $300,000

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

Required -

1. Prepare the journal entries necessary on January 2, 20x5 and December 31, 20x5.

2. Prepare the journal entries necessary on December 21, 20x6.

3. Prepare the journal entries necessary on January 2, 20x7.

Reference no: EM132906308

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