Chemicals Incorporated (ChemInc) is a public company (i.e., an SEC registrant) with a calendar year-end. Its headquarters and manufacturing facilities are located in Chicago, Illinois. ChemInc specializes in manufacturing medical compounds. Given the nature of these medical compounds, many require special storage until they are used in formulating drugs and/or medications by a pharmaceutical company. The special storage requirements include strict regulation of the temperature, air pressure, and humidity. ChemInc stores the medical compounds it manufactures in the appropriate storage facilities until they are purchased by and shipped to a customer. Qualified shipping specialists are used to ship the medical compounds to the …show more content…
• ChemInc agrees to sell $1,000,000 of MCA to Bond on December 20, 20X9, and store the product until Bond can take delivery into its newly constructed storage chamber. The sales agreement between ChemInc and Bond provides for the following: • ChemInc must segregate the MCA purchased by Bond from the rest of ChemInc’s inventory. Bond explicitly acknowledges that ChemInc has no further performance obligations related to the purchased MCA once ChemInc segregates the purchased MCA from the rest of ChemInc’s inventory. • ChemInc attests to the fact that the MCA purchased by Bond is complete and ready for shipment upon its segregation by ChemInc. • ChemInc requires payment from Bond under its normal payment terms, which require Bond to pay ChemInc for the purchased MCA by December 30, 20X9. • Bond agrees that its purchase commitment is noncancelable.
ChemInc segregates the inventory, as called for in the agreement, on December 20, 20X9. Also, ChemInc sends an invoice to Bond for $1,000,000 for the MCA purchased by Bond on the