Question

Sarasota Windows manufactures and sells custom storm windows for three-season porches. Sarasota 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. Sarasota enters into the following contract on July 1, 2020, with a local homeowner. The customer purchases windows for a price of $2,440 and chooses Sarasota to do the installation. Sarasota charges the same price for the windows irrespective of whether it does the installation or not. The customer pays Sarasota $2,040 (which equals the standalone selling price of the windows, which have a cost of $1,130) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2020, Sarasota completes installation on October 15, 2020, and the customer pays the balance due.

Sarasota estimates the standalone selling price of the installation based on an estimated cost of $420 plus a margin of 30% on cost.

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

Date	Account Titles and Explanation	Debit	Credit
Oct. 15, 2020Jul. 1, 2020Sep. 1, 2020
	(To record contract entered into)
Jul. 1, 2020Sep. 1, 2020Oct. 15, 2020
	(To record sales)
	(To record cost of goods sold)
Jul. 1, 2020Sep. 1, 2020Oct. 15, 2020
	(To record payment received)

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List of Accounts

  

  

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

Prepare the journal entries for Sarasota in 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
Sep. 1, 2020Oct. 15, 2020
	(To record sales)
	(To record cost of goods sold)
Oct. 15, 2020Sep. 1, 2020
	(To record payment received)

show work and explain

Answer 1

Answer:

Date	General Journal	Debit ($)	Credit ($)
A.)
Sep-01	Cash	$       2,040
	Accounts Receivable (2,440-2,040)	$           400
	Unearned service revenue* (546/2586) x (2,440)		$           515
	Sales revenue		$       1,925
Sep-01	Cost of goods sold	$       1,130
	Inventory		$       1,130
Oct-15	Cash	$           400
	Unearned service revenue	$           515
	Service revenue		$           515
	Accounts Payable		$           400
B.)
Sep-01	Cash	$       2,040
	Accounts Receivable (2,440-2,040)	$           400
	Unearned service revenue		$           400
	Sales revenue		$       2,040
Sep-01	Cost of goods sold	$       1,130
	Inventory		$       1,130
Oct-15	Cash	$           400
	Unearned service revenue	$           400
	Service revenue		$           400
	Accounts Payable		$           400

Note:

* : Unearned service revenue

={[(420 + 30%)]÷[2,040+(420 + 30%)]} × 2,440

=  (546/2586) x (2,440)

= $515