Question
In: Accounting
Carla Vista Company manufactures equipment. Carla Vista’s products range from simple automated machinery to complex systems...
Carla Vista Company manufactures equipment. Carla Vista’s
products range from simple automated machinery to complex systems
containing numerous components. Unit selling prices range from
$235,000 to $1,620,000, and are quoted inclusive of installation.
The installation process does not involve changes to the features
of the equipment to perform to specifications. Carla Vista has the
following arrangement with Winkerbean Inc.
| • | Winkerbean purchases equipment from Carla Vista on May 2, 2020, for a price of $1,100,000 and contracts with Carla Vista to install the equipment. Carla Vista charges the same price for the equipment irrespective of whether it does the installation or not. Using market data, Carla Vista determines that the installation service is estimated to have a fair value of $60,000. The cost of the equipment is $600,000. | |
| • | Winkerbean is obligated to pay Carla Vista the $1,060,000 upon delivery of the equipment and the balance on the completion of the installation |
Carla Vista delivers the equipment on June 1, 2020, and completes
the installation of the equipment on September 30, 2020. Assume
that the equipment and the installation are two distinct
performance obligations that should be accounted for
separately.
a) Prepare any journal entries for Carla Vista on May 2, June 1, and September 30, 2020.
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|
| May 2, | ||||
|
||||
|
(To record sales) |
||||
| June 1, | ||||
|
(To record cost of goods sold) |
||||
| September 30, 2020 | ||||
Solutions
Expert Solution
Working:
| Performance Obligation | Standalone Selling Price | Percent of Total Standalone Seling Price | Allocated Transaction Price |
| Sale of equipment | 1100000 | 94.83% | 1043103 |
| Installation service | 60000 | 5.17% | 56897 |
| Total | 1160000 | 100.00% | 1100000 |
Kindly round off as required since no instructions provided with the question regarding rounding off. Any other rounding off will cause the answers to vary. For any clarifications, write under the comments section.
| Date | Account Titles and Explanation | Debit | Credit |
| May 2, 2020 | No journal entry required | ||
| June 1, 2020 | Cash | 1060000 | |
| Sales revenue | 1043103 | ||
| Unearned service revenue | 16897 | ||
| (To record sales) | |||
| June 1, 2020 | Cost of goods sold | 600000 | |
| Inventory | 600000 | ||
| (To record cost of goods sold) | |||
| September 30, 2020 | Cash ($1100000 - $1060000) | 40000 | |
| Unearned service revenue | 16897 | ||
| Service revenue | 56897 | ||
| (To record service revenue) |
ekkarill92 answered 1 year agoRelated Solutions
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method was $960,000. Inventory data are as follows:
Year
Inventory at
year-end prices
Price index
(base year 2019)
2020
$1,285,200
1.05
2021
1,840,000
1.15
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1,930,000
1.25
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Inventory at December 31, 2020
Inventory at...
Shown below are comparative balance sheets for Carla Vista Company. Carla Vista Company Comparative Balance Sheets...
Shown below are comparative balance sheets for Carla Vista
Company.
Carla Vista Company
Comparative Balance Sheets
December 31
Assets
2022
2021
Cash
$ 170,000
$ 55,000
Accounts receivable
220,000
190,000
Inventory
417,500
472,500
Land
200,000
250,000
Equipment
650,000
500,000
Accumulated depreciation—equipment
(165,000
)
(80,000
)
Total
$1,492,500
$1,387,500
Liabilities and Stockholders’ Equity
Accounts payable
$ 97,500
$ 107,500
Bonds payable
375,000
500,000
Common stock ($1 par)
540,000
435,000
Retained earnings
480,000
345,000
Total
$1,492,500
$1,387,500
Additional information:
1.
Net income...
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