Pharoah Windows manufactures and sells custom storm windows for three-season por
ID: 341425 • Letter: P
Question
Pharoah Windows manufactures and sells custom storm windows for three-season porches. Pharoah 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. Pharoah enters into the following contract on July 1, 2017, with a local homeowner. The customer purchases windows for a price of $2,340 and chooses Pharoah to do the installation. Pharoah 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 $570. The customer pays Pharoah $1,960 (which equals the standalone selling price of the windows, which have a cost of $1,100) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2017, Pharoah completes installation on October 15, 2017, and the customer pays the balance due.
Date
Account Titles and Explanation
Debit
Credit
Jul. 1, 2017
(To record contract entered into)
Sep. 1, 2017
(To record sales)
(To record cost of goods sold)
Oct. 15, 2017
(To record payment received)
SHOW LIST OF ACCOUNTS
LINK TO TEXT
LINK TO TEXT
Date
Account Titles and Explanation
Debit
Credit
Sep. 1, 2017
(To record sales)
(To record cost of goods sold)
Oct. 15, 2017
(To record payment received)
Pharoah Windows manufactures and sells custom storm windows for three-season porches. Pharoah 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. Pharoah enters into the following contract on July 1, 2017, with a local homeowner. The customer purchases windows for a price of $2,340 and chooses Pharoah to do the installation. Pharoah 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 $570. The customer pays Pharoah $1,960 (which equals the standalone selling price of the windows, which have a cost of $1,100) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2017, Pharoah completes installation on October 15, 2017, and the customer pays the balance due.
Explanation / Answer
Answer 1. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1-Jul-17 No Entry (To record contract entered into) 1-Sep-17 Cash 1,960.00 Accounts Receivable 380.00 Unearned Service Revenue 470.00 Sales Revenue 1,870.00 (To record sales) Service Revenue - Installation 492 20% 470 Sales revenue 1,960 80% 1,870 Total 2,452 2,340 1-Sep-17 Cost of Goods Sold 1,100.00 Inventory 1,100.00 (To record cost of goods sold) 15-Oct-17 Cash 380.00 Unearned Service Revenue 470.00 Service Revenue 470.00 Accounts Receivable 380.00 To record payment received) Answer 2. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1-Jul-17 No Entry (To record contract entered into) 1-Sep-17 Cash 1,960.00 Accounts Receivable 380.00 Unearned Service Revenue 380.00 Sales Revenue 1,960.00 (To record sales) 1-Sep-17 Cost of Goods Sold 1,100.00 Inventory 1,100.00 (To record cost of goods sold) 15-Oct-17 Cash 380.00 Unearned Service Revenue 380.00 Service Revenue 380.00 Accounts Receivable 380.00 To record payment received)
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