UNEARNED REVENUE AND CUSTOMER DEPOSITS
On November 20, 2011, Billy Pilgrim Technology agreed to manufacture and supply 800 centrifuges used by Cathcart Systems to produce chemicals. Cathcart deposited $100 per unit upon signing the three-year purchase agreement, which set the selling price of each centrifuge at $500. Billy Pilgrim will record these units at $150 per unit in inventory. No units were delivered during 2011. During 2012, 125 units were delivered, 75 units were delivered during 2013, and the remaining units were delivered during 2014. Assume Billy Pilgrim uses a perpetual inventory system.
Required:
1. Prepare the entry by Billy Pilgrim to record receipt of the deposit during 2011. How would the deposit be reported in the financial statements at the end of 2011?
2. Prepare the entry by Billy Pilgrim to record the delivery of 125 units during 2012. How would the deposit be reported in the financial statements at the end of 2012?
3. Prepare the entry by Billy Pilgrim to record the delivery of 75 units during 2013. Cathcart pays in cash upon delivery for units not covered by the deposit.