Question

On September 25, 2014 Colson Corp. sold 200,000 widgetrons to Cavanaugh Corp at $5 per unit. Half of the units were delivered on November 15, 2014, and the remaining 100,000 units were delivered on January 20, 2015. At the time of sale Cavanaugh paid 40% of the contract price and agreed to pay the rest in equal installments on the two delivery dates. What amount of revenue should Colson recognize from this sale in 2014?a. $1,000,000b. $500,000c. $0d. $700,000

Answer 1

Answer:

Colson's Total revenue in 2014=$700,000

Explanation:

This can be expressed as;

Colson's total revenue in 2014=Initial amount paid+First installment paid on November 15, 2014

where;

Initial amount paid=40% of Contract price

Contract price=Cost per unit×Number of units=(5×200,000)=1,000,000

Initial amount paid=(40/100)×1,000,000=$400,000

First Installments paid=(Contract price-Initial amount paid)/2

(1,000,000-400,000)/2=300,000

Replacing in the expression above;

Colson's Total revenue in 2014=(400,000+300,000)=$700,000