On January 27, 2010, Lock Company Entered into a Three-Year

question 100

Essay

On January 27, 2010, Lock Company entered into a three-year agreement with Strong Enterprises to supply 2,000 ounces of platinum for $200 an ounce. During 2010, Lock mined and purified the 2,000 ounces of platinum at a cost of $200,000. The platinum was shipped on January 14, 2011 and arrived on January 15, 2011, at Strong's warehouse. What is Lock's revenue and gross profit recognized during 2010, consistent with the criteria for revenue recognition and the matching concept? Explain.

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Definitions:

Prime Costs

Direct materials and direct labor costs that are directly associated with the production of goods.

Factory Overhead Costs

Expenses related to operating a factory that cannot be directly traced to specific units produced, such as electricity, maintenance, and rent of the factory space.

Direct Labor Costs

Costs that are directly associated with the production of goods or services, typically wages paid to workers directly involved in manufacturing or production.

Indirect Cost

Expenses that are not directly attributable to a specific cost object, such as overhead costs.