AgriFoods,Inc.prepares and delivers agricultural products to industrial-scale kitchens and food service providers.One of its key customers is Home Kitchen & Co. ,which provides cafeteria solutions for corporations and universities.On January 1,2016,AgriFoods obtained a one-year contract to supply a pre-specified amount of vegetables to Home Kitchen,and received $600,000 in cash.Then,on March 15,AgriFoods hired Home to run one of its employee cafeterias for a period of six months,from April to September,and paid $70,000 in cash.For similar arrangements,Home usually charged $50,000.
Required: (a)Prepare the journal entries AgriFoods would record on January 1,2016 and January 31,2016 with respect to the sales contract.Assume revenue is accrued on a monthly basis.(b)Prepare the journal entry to account for AgriFoods' purchase of Home's services.
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