In: Accounting
Sunland Windows manufactures and sells custom storm windows for
three-season porches. Sunland 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.
Sunland enters into the following contract on July 1, 2017, with a
local homeowner. The customer purchases windows for a price of
$2,490 and chooses Sunland to do the installation. Sunland charges
the same price for the windows irrespective of whether it does the
installation or not. The installation service is estimated to have
a standalone selling price of $590. The customer pays Sunland
$1,950 (which equals the standalone selling price of the windows,
which have a cost of $1,110) upon delivery and the remaining
balance upon installation of the windows. The windows are delivered
on September 1, 2017, Sunland completes installation on October 15,
2017, and the customer pays the balance due.
Prepare the journal entries for Sunland in 2017.
Journal Entries | Allocation of Total Performance Obligation | |||||||
Date | Account Title & Explanation | Debit | Credit | Particular | Performance Obligation(a) | Purchase Price (b) | Allocation of Purchase Price (a*b)/$2540 |
|
01/07/2017 | No Entry | Sale of Window | $1,950.00 | $2,490.00 | $1,911.61 | |||
No Entry required for Company enters into Contract | Installation of Windows | $590.00 | $2,490.00 | $578.39 | ||||
$2,540.00 | $2,490.00 | |||||||
01/09/2017 | Cash | $1,950.00 | ||||||
Account Receivable | $540.00 | |||||||
Unearned Service Revenue | $578.39 | |||||||
Sales Revenue | $1,911.61 | |||||||
To Record sale of Windows and Performance Obligation | ||||||||
01/09/2017 | Cost of Goods Sold | $1,110.00 | ||||||
Inventory | $1,110.00 | |||||||
To Record Cost of Goods Sold | ||||||||
15/10/2017 | Cash | $540.00 | ||||||
Uneraned Service Revenue | $578.39 | |||||||
Service Revenue ( Installation) | $578.39 | |||||||
Account Receivable | $540.00 | |||||||
To Record Receipt of Cash on istallment of Windows |