Question

Geraths Windows manufactures and sells custom storm windows for three-season porches. Geraths 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. Geraths enters into the following contract on July 1, 2020, with a local homeowner. The customer purchases windows for a price of $2,400 and chooses Geraths to do the installation. Geraths charges the same price for the windows whether it does the installation, or not. The installation service is estimated to have a standalone selling price of $600. The customer pays Geraths $2,000 (which equals the standalone selling price of the windows, at a cost of $1,100) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2020, Geraths completes installation on October 15, 2020, and the customer pays the balance due.

Required:

Prepare the journal entries for Geraths in 2020. (Round amounts to nearest dollar.)

I want to know the answer on handwriting, plz.

Answer 1

Solution:-

Date	Particulars	Debit$	Credit$
1 july, 2020	No Journal is required (Merely signing a contract does not by itself require a journal entry)	-	-
1 Sep,2020	Cash	2,000
	Accounts receivable	400
	Sales revenue ($2000 / 2600) X 2400 (W.N1)		1,846
	Unearned sales revenue ($600 / 2600) X 2400 (W.N1)		554
	( To record the sale of windows and performance obligation for installation)
1 sep, 2020	Cost of goods sold	1,100
	Inventory		1,100
	(To record cost of goods sold)
15 Oct, 2020	Cash	400
	Unearned service revenue	554
	Service revenue		554
	Accounts receivable		400
	(To record receipt of cash and recognised service revenue)

Working note 1

Allocating transaction price to performance obligation

Particulars	Performance obligation A	Purchase price B	Allocation of purchase price C = B X (A / $2600)
Sale of windows	$2,000	$2,400	$1,846
Installation service	$600	$2,400	$$554
Total	$2,600