Sunland Windows manufactures and sells custom storm windows for three-season por

Question

Sunland Windows manufactures and sells custom storm windows for three-season porches. Sunland 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. Sunland 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 Sunland to do the installation. Sunland 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 Sunland $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, Sunland completes installation on October 15, 2017, and the customer pays the balance due.

Prepare the journal entries for Sunland in 2017.

Explanation / Answer

Journal Entries Allocation of Total Performance Obligation Date Account Title & Explanation Debit Credit Particular Performance Obligation(a) Purchase Price (b) Allocation of Purchase Price (a*b)/$2540 01/07/2017 No Entry Sale of Window $1,950.00 $2,490.00 $1,911.61 No Entry required for Company enters into Contract Installation of Windows $590.00 $2,490.00 $578.39 $2,540.00 $2,490.00 01/09/2017 Cash $1,950.00 Account Receivable $540.00 Unearned Service Revenue $578.39 Sales Revenue $1,911.61 To Record sale of Windows and Performance Obligation 01/09/2017 Cost of Goods Sold $1,110.00 Inventory $1,110.00 To Record Cost of Goods Sold 15/10/2017 Cash $540.00 Uneraned Service Revenue $578.39 Service Revenue ( Installation) $578.39 Account Receivable $540.00 To Record Receipt of Cash on istallment of Windows

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