Question

Riverbed Windows manufactures and sells custom storm windows for three-season porches. Riverbed 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. Riverbed enters into the following contract on July 1, 2017, with a local homeowner. The customer purchases windows for a price of $2,360 and chooses Riverbed to do the installation. Riverbed charges the same price for the windows irrespective of whether it does the installation or not. The customer pays Riverbed $2,100 (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, Riverbed completes installation on October 15, 2017, and the customer pays the balance due. Riverbed estimates the standalone selling price of the installation based on an estimated cost of $430 plus a margin of 10% on cost. Prepare the journal entries for Riverbed in 2017.

Answer 1

Date		Debit	Credit
Jul-01	No Journal Entry Required
Sep-01	Cash	$ 2,100.00
	Accounts Receivable	$     260.00
	Unearned Service Revenue		$     433.84
	Sales		$ 1,926.16
Sep-01	Cost of Goods Sold	$ 1,110.00
	Merchandise Inventory		$ 1,110.00
Oct-15	Cash	$     260.00
	Accounts Receivable		$     260.00
Oct-15	Unearned Service Revenue	$     433.84
	Service Revenue		$     433.84

windows	$ 2,100.00
Installation	$     473.00
Total	$ 2,573.00

Sales(2,360 *(2100/2573))	$      1,926.16
Unearned Service Revenue(473 *(2100/2573))	$          433.84
Total	$      2,360.00