Question

E18.12 (LO 3) (Allocate Transaction Price) Shaw Company sells goods that cost $300,000 to Ricard Company for $410,000 on January 2, 2020. The sales price includes an installation fee, which has a standalone selling price of $40,000. The standalone selling price of the goods is $370,000. The installation is considered a separate performance obligation and is expected to take 6 months to complete. Instructions a. Prepare the journal entries (if any) to record the sale on January 2, 2020. b. Shaw prepares an income statement for the first quarter of 2020, ending on March 31, 2020 (installa- tion was completed on June 18, 2020). How much revenue should Shaw recognize related to its sale to Ricard?

Answer 1

Α. C D 1 2 3 Credit Debit $410.000 a. Date Account Titles and Explanation 2-Jan-20 Accounts receivable Sales revenue Unearned service revenue (To record sales on account) $370,000 $40,000 8 $300,000 2-Jan-20 Cost of goods sold Merchandise inventory (To record cost of goods sold) $300,000 10 11 12 b. 14 Sales revenue Service revenue {$40,000 < (3/6)} Total revenue to be recognized $370,000 $20,000 $390.000 Calculations are shown below: C D Credit A 1 a. 2 Date Account Titles and Explanation 3 43832 Accounts receivable Sales revenue Unearned service revenue (To record sales on account) Debit 410000 370000 40000 300000 43832 Cost of goods sold Merchandise inventory (To record cost of goods sold) 300000 12 b. 13 Sales revenue Service revenue {$40,000 < (3/6)} Total revenue to be recognized 370000 =D5* (3/6) =C13+C14