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Holt Industries received a $2,000 prepayment from the Ramirez Company for the sale of new office furniture. Holt will bill Ramirez an additional $3,000 upon delivery of the furniture to Ramirez. Upon receipt of the $2,000 prepayment, how much should Holt recognize for a contract asset, a contract liability, and accounts receivable?

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Answer and Explanation:

The computation of the contract asset, a contract liability, and accounts receivable is shown below:

The contract asset is zero as it is not satisfied with the performance obligation

The current liability is $2,000 as it denotes the deferred revenue of $2,000 so this represent the contract liability

And, the account receivable is zero as it does not have the account receivable till the delivery of the furniture

in this way it should be recorded

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