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)

show work and explain

Answer 1

Please Note*** All figures in "$"

	Journal Entries
	In the Books of Sarasota
Date	Particulars	Debit	credit
1/7/2020	No Entry	0
	(No Journal Entry will be recorded for entering in a contract)		0
1/9/2020	cash A/c	2040
	Accounts receivable A/c	400
	Unearned revenue a/c		515
	Revenue a/c		1925
	( To record sales )
1/9/2020	Cost of good sold a/c	1130
	Inventory a/c		1130
	( To record cost of goods sold)
15/10/2020	Unearned revenue a/c	515
	Cash a/c	400
	Revenue a/c		515
	Accounts receivable A/c		400
	( To record reciept of payment )
Working Notes-
1/9/2020	To Record Sales **
	Fair value of Windows	2040
	Fair value of installation	546
	420+30%
	Total	2586
	Allocation of revenue will be as follows
	Windows(2040/2586)*2440	1925
	Installation(546/2586)*2440	515
	Total	2440
	(figures rounded to nearest dollar)