On August 1, 2017, Aiken Corporation enters into a contract with Benton Corp. to sell...
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Accounting
On August 1, 2017, Aiken Corporation enters into a contract with Benton Corp. to sell it $25,000 of goods. Aiken will deliver the goods on August 30, 2017, and Benton will pay the full amount upon acceptance. The goods were manufactured by Aiken at a cost of $18,000. Both Aiken and Benton consider the acceptance of the goods on August 30 a formality given that Benton has purchased the same goods from Aiken numerous times without incident. On August 30, 2017, Aiken delivers the goods and Benton transfers cash to Aiken.
Required:
| 1. | Does an enforceable contract exist between Aiken and Benton on August 1, 2017? |
| 2. | Prepare the journal entries in August 2017 necessary to account for this transaction. Assume Aiken uses a perpetual inventory system. |
| 3. | Next Level Assume that the contract is noncancelable. Would this condition allow Aiken to recognize revenue on August 1, 2017? |
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