Able Bakers sells cooking supplies and training services. Under a contract with Putnam Restaurants, Able will provide $60,000 of supplies and three months of training for $2,000 per month. Able's right to receive consideration for cooking supplies is conditional upon providing one month of training services before they can bill the customer for the supplies. When Able delivers the supplies on the first day of training services, Able will recognize
A) $60,000 receivable.
B) $60,000 contract liability.
C) $60,000 contract asset.
D) $60,000 unearned revenue.

Question

Quizplus · Accepted Answer

Able Bakers' right to receive consideration for the cooking supplies is contingent upon providing one month of training services. This creates a condition that must be met before Able can recognize the revenue, making it a contract asset rather than a receivable, liability, or unearned revenue. A contract asset is recognized when a company has provided goods or services but must fulfill additional conditions before being entitled to payment.

Able Bakers Sells Cooking Supplies and Training Services