On February 12, 2018, Mohawk Home and Garden Enters into Contract

question 192

Essay

On February 12, 2018, Mohawk Home and Garden enters into contract with a local business to provide weekly grass-cutting services between May and September of that year, and receives $2,000 in advance. As part of a local business promotion, Mohawk offers a 50% discount on any barbecue grill with a list price in excess of $200. In the past, Mohawk charged the same amount ($2,000) for the same weekly grass-cutting service, but without the grill discount coupon. Based on historical experience with other clients, Mohawk estimates that about 40% of the coupons will be redeemed, purchasing grills with an average total list price of $400.
Required:
(a) How many performance obligations are in this contract? Explain the reasons for your answer.
(b) Prepare the journal entry to account for the transaction as of February 12, 2018, clearly identifying the revenue or deferred revenue associated with each performance obligation.

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Definitions:

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