Question

Splish 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 Splish products and services.

Splish 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 $1,100. On a standalone basis, the grill sells for $800 (cost $480), and Splish estimates that the fair value of the installation service (based on cost-plus estimation) is $200. Splish signed 25 MG100 contracts on May 30, 2021, and customers paid the contract price in cash. The grills were delivered and installed on June 15, 2021. Prepare journal entries for Splish for MG100 in May and June 2021.

Splish sells its specialty combination gas/wood-fired grills to local restaurants. Each grill is sold for $1,550 (cost $600) on credit with terms 2/20, net/60.

Prepare the journal entries for the sale of 30 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.

Answer 1

a)
	Total Revenue = (25* $1100) = $ 27500
	Fair value of Grills ( $ 800 * 25) = $ 20000
	Fair value of Installation of Service ( $ 200 * 25) = $ 5000
	Total Fair value = $ 20000 + $ 5000 = 25000
	Allocation of Revenue Based on Fair Value
	Gas Grill = $ 20000 / $ 25000 * $ 27500 = $ 22000
	Installation Service = $ 5000 / $ 25000 * $ 27500 = $ 5500
	Journal entries for Splish for MG100 in May and June 2021.
1)	May-30-2021					( In Dollars)
		Cash A/c				Dr	27500
		To	Unearned Revenue ( Gas Grill Equipment)		22000
		To	Unearned Revenue (Installation)		5500
2)	June-15-2021
		Unearned Revenue ( Gas Grill Equipment)	Dr	22000
		Unearned Revenue (Installation)	Dr	5500
		To	Revenue ( Gas Grill Equipment)			22000
		To	Revenue ( Installation)			5500
		Cost of Goods Sold			Dr	12000
		To	Inventory ( Stock)				12000
			Cost ( $ 480 * 25 ) = 12000
b)	Journal entries for the sale of 30 grills on August 1, 2021
1)	Aug-01-2021
		Account Receivable A/c		Dr	45570
		To	Sale Revenue				45570
		( 1550 * 30 = 46500 - 2% Discount 930 = 45570)
		Cost of Goods Sold			Dr	18000
		To	Inventory ( Stock)				18000
			Cost ( $ 600 * 30 ) = 18000
	Aug-20-2021
		Cash A/c				Dr	45570
		To	Account Receivable				45570
2)	Aug-01-2021
		Account Receivable A/c		Dr	45570
		To	Sale Revenue				45570
		( 1550 * 30 = 46500 - 2% Discount 930 = 45570 )
		Cost of Goods Sold			Dr	18000
		To	Inventory ( Stock)				18000
			Cost ( $ 600 * 30 ) = 18000
	Sep-29-2021
		Cash A/c				Dr	46500
		To	Account Receivable				45570
		To	Discount Forfeited				930