Question

Problem 18-3

Riverbed Company sells total outdoor grilling solutions, 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 Riverbed products and services.

a.Riverbed offers contract GM205, 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 $820. On a standalone basis, the grill sells for $709 (cost $388), and Riverbed estimates that the standalone selling price of the installation service (based on cost-plus estimation) is $160. (The selling of the grill and the installation services should be considered two performance obligations.) Riverbed signed 10 GM205 contracts on April 20, 2017, and customers paid the contract price in cash. The grills were delivered and installed on May 15, 2017. Prepare journal entries for Riverbed for GM205 in April and May 2017. (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:

April 20, 2017

May 15, 2017

(To Record Sales)

(To record cost of goods sold)

b.he State of Kentucky is planning major renovations in its parks during 2017 and enters into a contract with Riverbed to purchase 370 durable, easy maintenance, standard charcoal grills during 2017. The grills are priced at $210 each (with a cost of $172 each), and Riverbed provides a 5% volume discount if Kentucky purchases at least 330 grills during 2017. On April 17, 2017, Riverbed delivered and received payment for 310 grills. Based on prior experience with the State of Kentucky renovation projects, the delivery of this many grills makes it certain that Kentucky will meet the discount threshold. Prepare the journal entries for Riverbed for grills sold on April 17, 2017. Assume the company records sales transaction net. (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.)

Entry to record sales:

Entry to record cost of goods sold:

c.Riverbed sells its specialty combination gas/wood-fired grills to local restaurants. Each grill is sold for $1,060 (cost $584) on credit with terms 2/30, net/90. Prepare the journal entries for the sale of 20 grills on September 1, 2017, and upon payment, assuming the customer paid on (1) September 25, 2017, and (2) October 15, 2017. Assume the company records sales net. (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.)

Entry to record sale (1)

Entry to Record Sale 2

d.On October 1, 2017, Riverbed sold one of its super deluxe combination gas/charcoal grills to a local builder. The builder plans to install it in one of its “Parade of Homes” houses. Riverbed accepted a 3-year, zero-interest-bearing note with face amount of $5,643. The grill has an inventory cost of $2,463. An interest rate of 10% is an appropriate market rate of interest for this customer. Prepare the journal entries on October 1, 2017, and December 31, 2017. (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 present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.)

Answer 1

RIVERBED COMPANY
General journal to record sales during the year 2017
a. To record the sale of GM205 contracts
Date	Account Title	Debit	Credit
Apr.20	Cash	8200
	Unearned Revenue		8200
	(Payment received for 10 GM205 contracts)
May.15	Unearned Revenue	8200
	Sales		7560
	Service Revenue		640
	(Completion of the 10 GM205 contracts)
	Cost of goods sold	3880
	Inventory		3880
	(Cost of 10 gas grills sold)
Standalone price of grill			709
Standalone price of installation service			160
Total price			869
Allocation price of combination price
	Total Price		820
	Allocated to grill (709/769)*820		756
	Allocated to installation		64

b. To record the sale of charcoal grills to Satet of Kentucky.
Date	Account Title	Debit	Credit
Apr.17	Accounts Receivable	61845
	Sales Discounts	3255
	Sales		65100
	(Sales of 310 charcoal grills to State of Kintucky)
	Cost of goods sold	53320
	Inventory		53320
	(Cost of the 310 grills sold )
	Cash	61845
	Accounts Receivable		61845
	(Payment received from State of Kentucky)
As the company is expecting Kentucky State to meet the discount threshold
discount is accounted.

c. To record the sale of gas / wood fired grills
Date	Account Title	Debit	Credit
Sept.1	Accounts Receivable	21200
	Sales		21200
	(Sales of 20 gas/wood fired grills)
	Cost of goods sold	11680
	Inventory		11680
	(Cost of the 20 gas/wood fired grills sold )
When the payment is received on Sept.25
Sept.25	Cash	20776
	Sales Discount	424
	Accounts Receivable		21200
	(Payment received for the sale of gas/wood fired grills)
When the payment is received on Oct.15
Oct.15	Cash	21200
	Accounts Receivable		21200
	(Payment received for the sale of gas/wood fired grills)

d. To record the sale of superd deluxe combination grill.
Date	Account Title	Debit	Credit
Sept.1	Accounts Receivable	4240
	Sales		4240
	(Sale of super deluxe combination grill)
	Cost of goods sold	2463
	Inventory		2463
	(Cost of the super deluxe combination grill)
	Note receivable	5643
	Premium on note receivable		1443
	Accounts Receivable		4240
	(Receipt of 3-year zero interest note gaianst the receivables)
	Non - interest bearing note received	5643
	Term	3 years
	Rate of interest	10%
	Present Value of the note - 5,643 / (1.10)^3	4240
	This will be the sale value of the grill.