On July 31, O'Malley Company Contracted to Have Two Products

question 56

Multiple Choice

On July 31, O'Malley Company contracted to have two products built by Taylor Manufacturing for a total of $185,000.The contract specifies that payment will only occur after both products have been transferred to O'Malley Company.O'Malley determines that the standalone prices are $100,000 for Product 1 and $85,000 for Product 2.On August 1, when Product 1 has been transferred, the journal entry to record this event include a

• A)debit to Accounts Receivable for $100,000.
• B)debit to Accounts Receivable for $85,000.
• C)debit to Contract Assets for $85,000.
• D)debit to Contract Assets for $100,000.

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Definitions:

Low Short-Term Interest Rate

A situation where the interest rates for borrowing funds for a short period are significantly lower than usual, typically indicating a policy aimed at stimulating economic growth.

Sub-Prime Borrowers

Individuals or entities with low credit ratings, indicating a higher risk of default to lenders.

Default Rates

The percentage of borrowers who fail to repay their loans or meet their debt obligations on time, often used as a measure of credit risk.

Adjustable-Rate Mortgages

Home loans with interest rates that can change over time based on market conditions.