Let's break down the question **step by step** with explanations, and then provide the **final answers**: --- ### **Step 1: Identify the Number of Performance Obligations** #### **Explanation:** Read the scenario and identify **distinct performance obligations** promised in the contract: - **Delivery of gold bars:** Gold Examiner promises to deliver 100 units of certified 1-ounce gold bars. - **Replacement shipment:** Gold Examiner promises to provide a replacement shipment at no additional cost if the product is lost in transit. - **Insurance service:** Gold Examiner provides a stand-alone price for the replacement insurance service. To be a separate performance obligation, the good or service must be distinct and separately identifiable. Here, **delivery of gold bars** and **replacement insurance service** are separately priced and distinct. #### **Answer for Step 1:** **There are 2 performance obligations in this contract:** 1. Delivery of gold bars 2. Replacement insurance service --- ### **Step 2: Prepare the Journal Entry for March 1, 2024** #### **Explanation:** On March 1, Gold Examiner receives $154,000 in cash from the bank. The revenue cannot be recognized yet because the gold bars have not been delivered, nor has the insurance service been provided. **Journal Entry for March 1 (Receipt of Cash):** | Date | Account Titles | Debit | Credit | |--------------|--------------------|-----------|-----------| | March 1, 2024| Cash | 154,000 | | | | Unearned Revenue | | 154,000 | (*Cash is received, but revenue is unearned until obligations are satisfied.*) --- ### **Step 3: Prepare the Journal Entries for March 30 and April 1, 2024** #### **Explanation:** - On **March 30**, Brinks picks up the gold bars. At this point, control of the gold bars is transferred, and revenue is recognized for the gold bars. - On **April 1**, delivery to the bank is completed, and the insurance service is considered provided. **Calculation of Stand-Alone Prices:** - Stand-alone price of gold bars: $1482 x 100 = $148,200 - Stand-alone price of insurance: $78 x 100 = $7,800 - Total: $148,200 + $7,800 = $156,000 - Allocation of transaction price ($154,000) to each obligation (proportionally): Gold Bars: $154,000 x ($148,200 / $156,000) = $146,231 Insurance: $154,000 x ($7,800 / $156,000) = $7,769 **Journal Entry for March 30 (Gold Bars Delivered):** | Date | Account Titles | Debit | Credit | |---------------|--------------------|-----------|-----------| | March 30, 2024| Unearned Revenue | 146,231 | | | | Sales Revenue | | 146,231 | **Journal Entry for April 1 (Insurance Service Provided):** | Date | Account Titles | Debit | Credit | |--------------|--------------------|-----------|-----------| | April 1, 2024| Unearned Revenue | 7,769 | | | | Service Revenue | | 7,769 | --- ## **Final Answers:** ### **1. Number of performance obligations:** **2** ### **2. Journal Entries:** #### **March 1, 2024:** | Account | Debit | Credit | |----------------------|-----------|-----------| | Cash | 154,000 | | | Unearned Revenue | | 154,000 | #### **March 30, 2024:** | Account | Debit | Credit | |----------------------|-----------|-----------| | Unearned Revenue | 146,231 | | | Sales Revenue | | 146,231 | #### **April 1, 2024:** | Account | Debit | Credit | |----------------------|-----------|-----------| | Unearned Revenue | 7,769 | | | Service Revenue | | 7,769 | --- **Let me know if you want the calculation details or have further questions!**

Let's analyze the scenario step-by-step to understand the accounting treatment and journal entries. --- ### **Step 1: Identify the Performance Obligations** **Explanation:** The contract involves two main promises: 1. **Delivery of gold bars:** Gold Examiner agrees to deliver 100 units of certified 1-ounce gold bars. 2. **Replacement insurance service:** Gold Examiner offers an insurance service to cover the replacement of lost gold in transit. **Reasoning:** Since these are distinct goods/services that are separately priced, they qualify as **two separate performance obligations**. **Final answer for Step 1:** **There are 2 performance obligations:** - Delivery of gold bars - Replacement insurance service --- ### **Step 2: Record the Receipt of Cash on March 1, 2024** **Explanation:** On March 1, 2024, Gold Examiner receives $154,000 in cash. However, revenue cannot be recognized immediately because the performance obligations (delivery of gold and insurance service) are not yet fulfilled. Instead, record this as **Unearned Revenue**. **Journal Entry:** | Date | Account Title | Debit ($) | Credit ($) | |------------------|---------------------|-----------|------------| | March 1, 2024 | Cash | 154,000 | | | | Unearned Revenue | | 154,000 | **Final note:** This reflects cash received but revenue will be recognized as obligations are satisfied. --- ### **Step 3: Recognize Revenue as Performance Obligations Are Satisfied** **Explanation:** - **March 30, 2024:** Gold is picked up and control is transferred to the customer (bank). - **April 1, 2024:** Delivery is completed, and the insurance service is provided. Using the stand-alone prices: - Gold bars price: 100 units x $1,482 = $148,200 - Insurance price: 100 units x $78 = $7,800 - Total stand-alone prices: $148,200 + $7,800 = $156,000 Calculate the **allocation** of the $154,000 transaction price: - Gold: ($148,200 / $156,000) × $154,000 ≈ $146,231 - Insurance: ($7,800 / $156,000) × $154,000 ≈ $7,769 **Journal Entries:** **March 30, 2024 (Gold shipment):** | Account Title | Debit ($) | Credit ($) | |---------------------|-----------|------------| | Unearned Revenue | 146,231 | | | | Sales Revenue | | 146,231 | **April 1, 2024 (Insurance service provided):** | Account Title | Debit ($) | Credit ($) | |---------------------|-----------|------------| | Unearned Revenue | 7,769 | | | | Service Revenue | | 7,769 | **Final notes:** - Revenue is recognized proportionally as obligations are fulfilled. - The remaining unearned revenue balance ($154,000 - $146,231 - $7,769 ≈ $0) is now fully recognized. --- ## **Summary of Final Answers:** 1. **Number of performance obligations:** **2** 2. **Journal entries:** | Date | Account Titles | Debit ($) | Credit ($) | |------------------|---------------------------|-----------|------------| | March 1, 2024 | Cash | 154,000 | | | | Unearned Revenue | | 154,000 | | March 30, 2024 | Unearned Revenue | 146,231 | | | | Sales Revenue | | 146,231 | | April 1, 2024 | Unearned Revenue | 7,769 | | | | Service Revenue | | 7,769 | --- Let me know if you'd like further clarification!