On January 1, 2017, Fryer Company Enters into a Contract

question 80

Multiple Choice

On January 1, 2017, Fryer Company enters into a contract to supply 600 pastry frying machines to a regional donut retailer. The machines will be delivered at a rate of 25 machines per month over 2 years at a transaction price of $1,000 per machine. The salesperson received a $36,000 sales commission on the date the contract was signed. The journal entry to record the transaction on January 1 will include a

• A) debit Prepaid Sales Commissions for $36,000.
• B) debit Sales Commission Expense for $36,000.
• C) credit Sales Revenue $600,000.
• D) credit Sales Revenue $564,000.

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Definitions:

American Call Option

A type of call option that can be exercised at any time before its expiration date for purchasing an underlying asset at an agreed-upon price.

Predetermined Price

A price agreed upon by all parties in a financial contract or transaction, set before any exchanges are made.

Security

A financial asset signifying either an equity stake in a corporation that's publicly traded (known as stock), a debt investment in a company or government (referred to as a bond), or entitlements to ownership through an option.

Put Option

This is a financial deal that permits the carrier to optionally sell a specified volume of an underlying asset at a designated price within an agreed timeframe, without mandatory action.