Question

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, 2020, with a local homeowner. The customer purchases windows for a price of $2,340 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 $570. The customer pays Sunland $1,960 (which equals the standalone selling price of the windows, which have a cost of $1,100) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2020, Sunland completes installation on October 15, 2020, and the customer pays the balance due. Prepare the journal entries for Sunland in 2020. (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 O for the amounts. Round answer to 0 decimal places, e.g. 5,125.) Date Account Titles and Explanation Debit Credit (To record contract entered into) (To record sales) (To record cost of goods sold)

Answer 1

Answer -

Date	Accounts Titles and Explanation	Debit	Credit
July 1 ,2020	No entry
	No entry
Sept. 1, 2020	Cash	$1960
	Accounts receivable	$380
	Unearned service revenue		$527
	Sales revenue		$1813
	(To record sales)
Sept. 1, 2020	Cost of goods sold	$1100
	Inventory		$1100
	(To record cost of goods sold)
Oct. 15, 2020	Cash	$380
	Unearned service revenue	$527
	Service revenue		$527
	Accounts receivable		$380

Calculation:

July 1, 2020: Party hasn’t performed under the contract

On Sept. 1, 2020: Sunland windows manufactures has two performance obligations:

(1) The delivery of the windows and (2) Installation of the windows

	Amount
Windows	$1960
Installation	$570
Total	$2530

Allocation :

	Amount
Windows [($1960 / $2530) * $2340]	$1813
Installation [($570 / $2530) * $2340]	$527
Revenue recognized	$2340