AgriFoods, Inc

question 290

Essay

AgriFoods, Inc. prepares and delivers agricultural products to industrial-scale kitchens and food service providers. One of its key customers is Home Kitchen & Co., which provides cafeteria solutions for corporations and universities. On January 1, 2018, AgriFoods obtained a one-year contract to supply a pre-specified amount of vegetables to Home Kitchen, and received $600,000 in cash. Then, on March 15, AgriFoods hired Home to run one of its employee cafeterias for a period of six months, from April to September, and paid $70,000 in cash. For similar arrangements, Home usually charged $50,000.
Required:
(a) Prepare the journal entries AgriFoods would record on January 1, 2018 and January 31, 2018 with respect to the sales contract. Assume revenue is accrued on a monthly basis.
(b) Prepare the journal entry to account for AgriFoods' purchase of Home's services.

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Definitions:

Price/Earnings

A ratio used to value a company by dividing its current share price by its per-share earnings, indicating the dollar amount an investor can expect to invest in a company in order to receive one dollar of that company’s earnings.

Dividend Yield

An economic indicator that highlights the yearly amount a company distributes in dividends in comparison to its stock price.

Inventory Turnover

A financial metric that measures the rate at which a company sells and replaces its stock of goods over a period, indicating efficiency in sales and inventory management.

Interest Earned

The income received from investing in interest-bearing financial instruments or accounts.