Exercise 18-10 Sandhill Windows manufactures and sells custom storm windows for
ID: 2397579 • Letter: E
Question
Exercise 18-10 Sandhill Windows manufactures and sells custom storm windows for three-season porches. Sandhill also provides installation service for the windows. The installation process does not involve changes in the windows, so this service can be performed by other vendors. Sandhill enters into the following contract on July 1, 2017, with a local homeowner. The customer purchases windows for a price of $2,490 and chooses Sandhill to do the installation. Sandhill charges the same price for the windows irrespective of whether it does the installation or not. The installation service is estimated to have a standalone selling price of $590. The customer pays Sandhill $1,950 (which equals the standalone selling price of the windows, which have a cost of $1,110) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2017, Sandhill completes installation on October 15, 2017, and the customer pays the balance due Prepare the journal entries for Sandhll in 2017. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter O for the amounts. Round answer to 0 decimal places, e.g. 5,125.) Date Account Titles and Explanation Debit Credit Jul. 1, 2017 No Entry No Entry To record contract entered into) Sep. 1, 2017 Cash 195 s Receivable Unearned Service Revenue Service Revenue (To record sales) Cost of Goods Sold To record cost of goods sold) Oct. 15, 2017 Cash Unearned Service Revenue Service Revenue ReceivableExplanation / Answer
Solution:
On September 1, 2017, Sandhill has two performance obligations: (1) the delivery of the windows and (2) the installation of the windows.
Total fair value of window and installation = $1,950 + $590 = $2,540
Allocation to window = $2,490 * $1,950 / $2,540 = $1,912
Allocation to installation services = $2,490 * $590 / $2,540 = $578
Journal Entries - Sandhill Windows Date Particulars Debit Credit 1-Jul-17 No Entry $0.00 No Entry $0.00 (To record contract entered into) 1-Sep-17 Cash Dr $1,950.00 Accounts receivables Dr $540.00 To Unearned service revenue $578.00 To Service Revenue $1,912.00 (To record sales) 1-Sep-17 Cost of goods sold Dr $1,110.00 To Inventory $1,110.00 (To record cost of goods sold) 15-Oct-17 Cash Dr $540.00 Unearned service revenue Dr $578.00 To Service revenue $578.00 To Accounts receivables $540.00 (To record collection from customer and to recognize revenue)Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.