Question

Buffalo Ranch & Farm is a distributor of ranch and farm equipment. Its products include small tools, power equipment for trench-digging and fencing, grain dryers, and barn winches. Most products are sold direct via its company Internet site. However, given some of its specialty products, select farm implement stores carry Buffalo’s products. Pricing and cost information on three of Buffalo’s most popular products are as follows.

Item		Stand-Alone Selling Price (Cost)
Mini-trencher		$2,900	($1,640)
Power fence hole auger		984	($656)
Grain/hay dryer		12,090	($9,020)

Respond to the requirements related to the following independent revenue arrangements for Buffalo Ranch & Farm. IFRS is a constraint.

On January 1, 2020, Buffalo sells augers to Mills Farm & Fleet for $39,360. Mills signs a six-month note at an annual interest rate of 12%. Buffalo allows Mills to return any auger that it cannot use within 60 days and receive a full refund. Based on prior experience, Buffalo estimates that 5% of units sold to customers like Mills will be returned (using the most likely outcome approach). Buffalo’s costs to recover the products will be immaterial, and the returned augers are expected to be resold at a profit. Prepare the journal entries for Buffalo on January 1, 2020. (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.)

Date	Account Titles and Explanation	Debit	Credit
January 1, 2020
	(To record sale on account)
January 1, 2020
	(To record cost of goods sold)

On August 10, 2020, Buffalo sells 19 mini-trenchers to a farm co-op in western Canada. Buffalo provides a 4% volume discount on the mini-trenchers if the co-op has a 15% increase in purchases from Buffalo compared with the prior year. Given the slowdown in the farm economy, sales to the co-op have been flat, and it is highly uncertain that the benchmark will be met.

Prepare the journal entries for Buffalo on August 10, 2020. (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.)

Buffalo sells three grain/hay dryers to a local farmer at a total contract price of $38,000. In addition to the dryers, Buffalo provides installation, which has a stand-alone sales value of $520 per unit installed. The contract payment also includes a $1,170 maintenance plan for the dryers for three years after installation. Buffalo signs the contract on June 20, 2020, and receives a 20% down payment from the farmer. The dryers are delivered and installed on October 1, 2020, and full payment is made to Buffalo.

Prepare the journal entries for Buffalo in 2020 related to this arrangement as well as any adjusting journal entries at its December year end. (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. Record journal entries in the order presented in the problem. Round answers to 0 decimal places, e.g. 5,275.)

On April 25, 2020, Buffalo ships 80 augers to Farm Depot, a farm supply dealer in Alberta, on consignment. By June 30, 2020, Farm Depot has sold 50 of the consigned augers at the listed price of $984 per unit. Farm Depot notifies Buffalo of the sales, retains a 10% commission, and remits the cash due to Buffalo.

Prepare the journal entries for Buffalo and Farm Depot for the consignment arrangement. (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. Record journal entries in the order presented in the problem.)

Answer 1

(a)

Account Titles and Explanation	Debit	Credit
Jan 1, 2020 Accounts receivable	39360
Sales revenue		39360
(To record sales)
Jan 1,2020 Cost of goods sold (40 x $656)	26240
Inventory		26240
(To record cost of goods sold)

(b)

Account Titles and Explanation	Debit	Credit
Aug 10, 2020 Cash	55100
Sales revenue		55100
(To record sales)
Aug 10,2020 Cost of goods sold (19 x $1640)	31160
Inventory		31160
(To record cost of goods sold)

(c)

Date	Account Titles and Explanation	Debit	Credit
Jun. 20, 2020	Accounts Receivable	$38,000
	Installation Payable (3 units * $520 per unit)		$1,560
	Maintenance Payable		$1,170
	Sales Revenue ($38,000*20/100)		$7600
	Unearned Revenue ($38,000 - $1560 - $1,170 - $7600)		$27,670
	(To record the contract)
Jun. 20, 2020	Cash	$7600
	Accounts Receivable		$7600
	(To record the collection of down payment)
Oct. 1, 2020	Unearned Revenue	$27,670
	Cash ($38000 - $7600)	$30,400
	Sales Revenue		$27670
	Accounts Receivable		$30,400
	(To record the sales)
Oct. 1, 2020	Cost of Goods Sold ($38,000 - $1560 - $1170)	$35,270
	Inventory		$35,270
	(To record the cost of goods sold)
Oct. 1, 2020	Installation Payable	$1560
	Installation		$1560
	(To record the installation expenses)

(d)

Date	Account Titles and Explanation	Debit	Credit
April. 25, 2020	No entry- Inventory contiued to be controlled
Jun 30, 2020	Cash	44280
	Consignment expense(49200 *10%)	4920
	Cost of goods sold(50*656)	32800
	Sales revenue(50* 984)		$49,200
	Inventory		32800
	Entries for Depot

April 25,2020	No entry -Inventory continued to be controlled
June 30,2020	Cash	$49,200

	Consignment Due		44280
	Unearned service revenue		4920

	( for consignment sales)

Jun 30, 2020	Consignment due	44280
	Unearned service revenue	4920
	Service revenue		4920
	Cash		44280

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