Gupta Industries received a $200,000 prepayment from Packard Associates for the sale of new equipment. Gupta will bill Packard an additional $120,000 upon delivery of the equipment. Upon receipt of the $200,000 prepayment, how much should Gupta recognize for a contract asset, a contract liability, and accounts receivable?

Contract asset: $0

Contract liability: $200,000

Accounts receivable=$0

Explanation:

The following entry shall be recorded by the Gupta Industries in its accounts on the receipt of the prepayment amounting to $200,000 from the Packard Associates for the sale of the new equipment:

Debt Credit

Cash $200,000

Contract liability $200,000

So based on the above journal entry, the Gupta Industries shall recognise the following amounts in respect of contract asset, a contract liability, and accounts receivable

Contract asset: $0

Contract liability: $200,000

Accounts receivable=$0