Question

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 $2,340 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 customer pays Sandhill $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, Sandhill completes installation on October 15, 2017, and the customer pays the balance due.

1. Sandhill estimates the standalone selling price of the installation based on an estimated cost of $410 plus a margin of 20% on cost.

Prepare the journal entries for Sandhill 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 0 for the amounts. Round answer to 0 decimal places, e.g. 5,125.)

2. Given uncertainty of finding skilled labor, Sandhill is unable to develop a reliable estimate for the standalone selling price of the installation.

Prepare the journal entries for Sandhill in 2017.

Answer 1

Answer:

Particulars	Performance Obligation (A)	Prchase Price (B)	Allocation of purchase price (B) x (a)/ 2452
Sale of windows	1960	2340	1870

Installion 492 2340 470

Prepare the journal entries as shown below:

Date	Account Titles and explanation	Debit	Credit
1/7/17	No Entry
1/9/17	Cash	1960
	Accounts Receivable	380
	Unearned service revenue		470
	Sales Revenue		1870
	Being sales of installation obligation)
1/9/17	Cost of goods sold	1100
	Inventory		1100
	Being the cost of windows sold
15/10/17	cash	380
	Unearned service revenue	470
	Service revenue		470
	Accounts receivable		380

Being service revenue from instalation)

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