Check your answer
Write your response and explain your reasoning.
At December 31, a company has the following mixed worklist. It contains claims, a customer credit, and an unresolved invoice. Its signed total is a control amount to reconcile, not an approved financial-statement caption. All amounts are in US dollars. Assume a normal operating cycle shorter than one year, no related parties, and no right to offset balances between counterparties.
| Item | Amount | Established facts |
|---|---|---|
| Customer account | $10,000 debit | Ordinary sales; performance complete; unconditional right due within thirty days. |
| Support right | $9,200 debit | Performance has occurred, but payment still depends on completing the next support milestone. |
| Employee advance | $6,000 debit | Repayable in cash within sixty days; no note instrument. |
| Equipment-sale note | $12,000 debit | Sale of used operating equipment outside ordinary sales; principal due in eighteen months. Ignore interest for this classification task. |
| Customer overpayment | $2,000 credit | Refundable to a different customer; no future service is owed. |
| Disputed invoice | $4,000 debit | The file lacks the signed price terms and the substance of the dispute. |
The established customer account opened at $6,000. During the year, qualifying credit sales added $9,000 and collections reduced it by $5,000. There were no returns, discounts, writeoffs, transfers, or other movements in that account. The disputed invoice is a separate worklist item and is excluded from this rollforward.
Classify the established records
For each item, state its origin, instrument, remaining payment condition, current or noncurrent classification where the facts permit, and inclusion or exclusion from the unconditional-receivable group. Keep the disputed item separate and name the evidence needed to resolve it.
Compute the debit-only and signed worklist totals and the confirmed unconditional rights. Explain why the refundable credit cannot reduce another customer's receivable. Reconcile the established customer account and explain the difference between its credit-sales revenue and collections.
Use the conditional-right distinction in ASC 606-10-45-3 and 45-4. The numerical model checks selected sums; it does not decide which rights exist.
Resolve two alternative files
Treat these as mutually exclusive follow-up facts about the disputed invoice:
- Alternative A: A signed price agreement and the seller's established sales practice show that the seller expected entitlement to only $3,000 at inception. Performance is complete and that amount is now unconditional. There is no evidence of later credit deterioration.
- Alternative B: Signed terms and completed performance establish the full $4,000 right. A later funding failure reduces the customer's ability to pay. The seller has not changed the price or released the customer from payment.
For each alternative, update the gross customer-account and unconditional-right subtotals. Explain whether the missing amount concerns transaction price or credit loss, and identify the work needed before posting a correction or allowance. State what contrary evidence would change your conclusion. Do not invent an allowance rate, net carrying amount, or approved entry.
Compare your reasoning with the worked answer
The $10,000 customer account is a current trade receivable. The $9,200 conditional right is a contract asset, outside the unconditional-receivable group. The $6,000 employee advance is a current nontrade receivable; the $12,000 equipment-sale note is a noncurrent nontrade note receivable. Confirmed unconditional rights total $28,000. Keep the $2,000 refundable customer overpayment as a liability, without offset against another customer. Keep the disputed $4,000 separate pending the missing evidence. The worklist's debit amounts total $41,200; subtracting its $2,000 credit gives the $39,200 signed control total. Neither control total is an approved receivable caption. The established customer account reconciles as $6,000 opening plus $9,000 credit sales less $5,000 collections, or $10,000 ending. Its $4,000 increase explains the difference between revenue and collections under the stated exclusions. Under alternative A, the signed price evidence establishes a $3,000 right, not $4,000; ordinary customer accounts then total $13,000 and all confirmed unconditional rights total $31,000. Under alternative B, the established $4,000 right brings those gross totals to $14,000 and $32,000. Credit deterioration requires a separate allowance analysis; no allowance amount can be computed from this packet. Do not apply both alternatives together.