Gupta Industries received a $380,000 prepayment from Packard Associates for the sale of new equipment. Gupta will bill Packard an additional $108,000 upon delivery of the equipment. Upon receipt of the $380,000 prepayment, how much should Gupta recognize for a contract asset, a contract liability, and accounts receivable? A) Contract asset $380,000, contract liability: $0, accounts receivable, $108,000. B) Contract asset: $0: contract liability: $380,000, accounts receivable, $108,000 C) Contract asset: $380,000, contract liability: $0, accounts receivable, $0. D) Contract asset: $0, contract liability: $380,000, accounts receivable, $0.

Respuesta :

Answer: the correct answer is D) Contract asset: $0, contract liability: $380,000, accounts receivable, $0.

Explanation: Contract asset is $0 because the asset belongs to the company that has the equipment which is Packard Associates. Gupta has a liability of $380,000 because it has to deliver the equipment. Accounts receivable are $0 because the equipment hasn't been delivered yet.