Question

Waterway Windows manufactures and sells custom storm windows for three-season porches. Waterway 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. Waterway enters into the following contract on July 1, 2020, with a local homeowner. The customer purchases windows for a price of $2,470 and chooses Waterway to do the installation. Waterway charges the same price for the windows irrespective of whether it does the installation or not. The customer pays Waterway $1,940 (which equals the standalone selling price of the windows, which have a cost of $1,050) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2020, Waterway completes installation on October 15, 2020, and the customer pays the balance due.

Waterway estimates the standalone selling price of the installation based on an estimated cost of $450 plus a margin of 30% on cost.

Prepare the journal entries for Waterway 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.)

Answer 1

Answer :-

Date	Particulars	Debit	Credit
01/07/2020	No journal entry
	( is required for the contract entered)
09/07/2020	Cash	$1,940
	Accounts receivable	$529.99
	Unearned service revenue		465.06
	Sales revenue		2004.93
	( TO record sale of windows and performance obligation for installation)
09/07/2020	Cost of goods sold	$1,050
	Inventory		$1,050
	( To record cost of goods sold on sale of windows)
15/10/2020	Cash	$ 529.99
	Unearned service revenue	$465.06
	Service revunue		$465.06
	Accounts receivable		$529.99
	( To record receipt of cash on installation of windows)

Working Note :

Particulars	Performance obligation(A)	Purchase price(B)	Allocation of purchase price(B)*(A)/2,390
Sale of Windows	1,940	2,470	2004.93
Installation of Windows	450	2,470	465.06
	2,390		$2,470