Question

Gupta Industries received a $350,000 prepayment from Packard Associates for the sale of new equipment. Gupta will bill Packard an additional $105,000 upon delivery of the equipment. Upon receipt of the $350,000 prepayment, how much should Gupta recognize for a contract asset, a contract liability, and accounts receivable

Answer 1

$0 ; $350,000 ; $105,000

Step-by-step explanation:

Given that

Received prepayment = $350,000

Additional billed amount = $105,000

So by considering the above information, the contract asset and the account receivable are zero while the contract liability is $350,000 because it is advanced from the customer so it would be treated as a current liability. Therefore, the amount of contract asset and the account receivable is zero