How Teal Inc. Turned a Contract into a Successful Delivery

How did Teal Inc. handle the contract with Kickapoo Landscaping Co.?

Prepare the journal entries on May 1, May 15, and May 31, 2020, for Teal Inc.

Answer:

A. May 1, 2020: No entry

B. May 15, 2020: Dr Cash $990, Cr Unearned revenue $990

C. May 31, 2020: Dr Unearned revenue $990, Cr sales $990, Dr cost of goods sold $648, Cr Inventory $648

Teal Inc. demonstrated excellence in fulfilling its contract with Kickapoo Landscaping Co. by executing timely journal entries at each critical juncture.

The Process

On May 1, 2020, Teal Inc. entered into a contract with Kickapoo Landscaping Co. to deliver a specialty mower. No journal entry was made on this date as it signified the agreement's initiation.

On May 15, 2020, Kickapoo paid Teal Inc. the contract price of $990 in advance. Teal recorded this transaction by debiting Cash for $990 and crediting Unearned revenue for $990.

Finally, on May 31, 2020, Teal delivered the mower to Kickapoo. To reflect the completion of the sale, Teal debited Unearned revenue and credited Sales for $990 each. Additionally, the cost of goods sold amounting to $648 was debited, and Inventory was credited for the same amount.

The Outcome

Through meticulous handling of journal entries, Teal Inc. effectively converted a contract into a successful delivery, showcasing professionalism and financial acumen.