assignment takeonprogresszf m eBook Show Me HowCalculator Contract Modification

Question

assignment takeonprogresszf m eBook Show Me HowCalculator Contract Modification Chart of A Analysis General Journal Instructions Justkitchens Inc. provides services to restaurants and hotels. The company supplies paper products, tableware, cookware, restaurant and equipment, and cleaning supplies. On Januar 3 years at a cost of $10,000per year. The restaurant chain pays the total contract fee y 2, 2017, Just- Kitchens enters into a contract with a local restaurant chain to provide its services for on January 2, 2017. Justkitchens's stand-alone selling price is also $10,000 per year After 2 years, the restaurant asks to modify in exchange for extending the contract for 2 additional years at a fee of $11,000 per year. This modification is agreed to by both parties, and on that date the restaurant chain pays for the additional 2 years of service and deducts $1,000 for the adjustment to the orlginal contract. The $11,000 fee for the additional years is the same as Justkitchens's stand-alone price the contract. On January 2, 2019, the companies agree to reduce the fee for the third year to $9,000 Required: 1. How should Justkitchens account for the contract modification? PreviousNext Check Hy Werk 4d 11/25/2017 246 PM earch

Explanation / Answer

In the year 2017 Just-Kitchens records the following entry for the receipt of total contract fee for 3 years as follows Date Account ID Account title Debit $ Credit $ Jan.2.2017 111 Cash 30,000.00 250 To Unearned revenue 30,000.00 (Being contract fee received for three years) Dec.31.2017 250 Unearned revenue 10,000.00 411    To Service Revenue-2017 10,000.00 (Being service revenue transferred from unearned to revenue a/c for the year 2017) Dec.31.2018 250 Unearned revenue 10,000.00 411    To Service Revenue-2018 10,000.00 (Being service revenue transferred from unearned to revenue a/c for the year 2018) Jan.2.2019 111 Cash 21,000.00 250 Unearned revenue ( First contract)     1,000.00 250 To Unearned revenue (Second contract) 22,000.00 (Being contract fee received for two more years and reduction in first contract fee also recognised)

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