Question

In: Accounting

Oriole Company sells outdoor grilling products, providing gas and charcoal grills, accessories, and installation services for...

Oriole Company sells outdoor grilling products, providing gas and charcoal grills, accessories, and installation services for custom patio grilling stations. Respond to the requirements related to the following independent revenue arrangements for Oriole products and services. Oriole offers contract MG100 which is comprised of a free-standing gas grill for small patio use plus installation to a customer’s gas line for a total price $1,150. On a standalone basis, the grill sells for $800 (cost $400), and Oriole estimates that the fair value of the installation service (based on cost-plus estimation) is $200. Oriole signed 30 MG100 contracts on May 30, 2021, and customers paid the contract price in cash. The grills were delivered and installed on June 15, 2021.

1- Prepare journal entries for Oriole for MG100 in May and June 2021

2-Oriole sells its specialty combination gas/wood-fired grills to local restaurants. Each grill is sold for $1,600 (cost $610) on credit with terms 3/20, net/60. Prepare the journal entries for the sale of 35 grills on August 1, 2021, and upon payment, assuming the customer paid on (1) August 20, 2021, and (2) September 29, 2021. Assume the company records sales net.

Solutions

Expert Solution

(1) Total revenue = ($1150 * 30) = $34500

Fair value of grills = ($800 * 30) = $24000

Fair value of installation fee = (200 * 30) = $6000

Total Fair value = $24000 + $6000 = $30000

Allocation:-

Equipment = $34500 * ($24000/$30000) = $27600

Installation = $34500 * ($6000/$30000) = $6900

Date

General Journal

Debit

Credit

May 30, 2021

Cash

$34500

Unearned Service Revenue (Installation)

$6900

Unearned Service Revenue (Equipment)

$27600

June 15, 2021

Unearned Service Revenue (Installation)

$6900

Unearned Service Revenue (Equipment)

$27600

Service Revenue (Installation)

$6900

Service Revenue (Equipment)

$27600

Cost of Goods Sold

$12000

Inventory ($400 * 30)

$12000

(2) (i)

Date

General Journal

Debit

Credit

Aug 1, 2021

Accounts Receivable

($56000) – (3% * $56000)

$54320

Sales Revenue

$54320

Cost of Goods Sold ($610 * 35)

$21350

Inventory

$21350

Aug 20, 2021

Cash

$54320

Accounts Receivable

$54320

(2) (ii)

Date

General Journal

Debit

Credit

Aug 1, 2021

Accounts Receivable

$54320

Sales Revenue

$54320

Cost of Goods Sold

$21350

Inventory

$21350

Sep 29, 2021

Cash

$56000

Accounts Receivable

$54320

Sales Discounts Forfeited

$1680


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