Question

Economy completes manual omy and Epic have documented the warehouse arrange ready to ship, and Economy may not sell these units to other customers. The (1) February 1, 2017, and (2) April 1, 2017 P18-5 (L02,3,4) (Allocate Transaction Price, Retums, and Consignments) Ritt Ranch & Farm is a distributor of ranch and farm equipment. Its products range from small tools, power equipment for trench-digging and fencing grain dryers, and barn winches. Most products are sold direct via its company catalog and Internet site. However, given some of its specialty products, select farm implement stores carry Ritt's products. Pricing and cost information on three of Ritt's most popular products are as follows. Item Standalone Selling Price (Cost) $ 3,600 ($2,000) 1,200 (800) 14,000 (11,000) Mini-trencher Power fence hole auger Grain/hay dryer Instructions Respond to the requirements related to the following independent revenue arrangements for Ritt Ranch & Farm. a) On January 1, 2017, Ritt sells 40 augers to Mills Farm & Fleet for $18.000. Mills signs a 6-month note at an annual interest rate of 127 Ritt allows Mills to return any auger that it cannot use within 60 days and receive a full refund. Based on prior experience, Ritt estimates that 5% of units sold to customers like Mills will be returned (using the most likely outcome approach). Ritt's costs to recover the products will be immaterial, and the returned augers are expected to be resold at a profit. Prepare the journal entry for Ritt on January 1, 2017 10, 2017, Ritt sells 16 mini-trenchers to a farm co-op in western Minnesota. Ritt provides a 4% volume dis- count on the mini-trenchers if the co-op has a 15% increase in purchases from Ritt compared to the prior year. Given the slowdown in the farm economy, sales to the co-op have been flat, and it is highly uncertain that the benchmark will be met. Prepare the journal entry for Ritt on August 10, 2017 ( Ritt sells three grain/hay dryers to a local farmer at a total contract price of $45,200. In addition to the dryers, Ritt pro- vides installation, which has a standalone selling price of $1,000 per unit installed. The contract payment also includes a $1,200 maintenance plan for the dryers for 3 years after installation. Ritt signs the contract on June 20, 2017, and receives a 20% down payment from the farmer. The dryers are delivered and installed on October 1, 2017, and full pay- ment is made to Ritt. Prepare the journal entries for Ritt in 2017 related to this arrangement. (d) On April 25, 2017, Ritt ships 100 augers to Farm Depot, a farm supply dealer in Nebraska, on consignment. By June 30, 2017, Farm Depot has sold 60 of the consigned augers at the listed price of $1,200 per unit. Farm Depot notifies Ritt of the sales, retains a 10% commission, and remits the cash due Ritt. Prepare the journal entries for Ritt and Farm Depot for the consignment arrangement. BÊ | Đai 3..

Answer 1

Part A

Date	Account titles and explanation	Debit	Credit
January 1, 2017	Notes receivable	48000
	Refund liability (48000*5%)		2400
	Sales revenue		45600
January 1, 2017	Cost of goods sold	30400
	Estimated inventory returns (40*800*5%)	1600
	Inventory (40*800)		32000

Part B

Date	Account titles and explanation	Debit	Credit
August 10, 2017	Cash (16*3600)	57600
	Sales revenue		57600
August 10, 2017	Cost of goods sold	32000
	Inventory (16*2000)		32000

Part C

Date	Account titles and explanation	Debit	Credit
June 20, 2017	Cash (45200*20%)	57600
	Accounts receivable (45200-9040)	36160
	Unearned Revenue - Installation		2935
	Unearned Revenue - Maintenance Plans		1174
	Unearned Revenue - Dryers		41091
October 1, 2017	Cash (45200*80%)	36160
	Accounts receivable		36160
October 1, 2017	Unearned Revenue - Installation	2935
	Unearned Revenue - Dryers	41091
	Service Revenue - Installation		2935
	Sales Revenue		41091
October 1, 2017	Cost of goods sold	33000
	Inventory (3*11000)		33000
December 31, 2017	Unearned Revenue - Maintenance Plans	98
	Service Revenue - Maintenance Plans (1174*3/36)		98

Dryers (14000*3)	42000
Installation (1000*3)	3000
Maintenance plan	1200
Total estimated fair value	46200

Allocation for a single contract
Dryers (42000/46200*45200)	41091
Installation (3000/46200*45200)	2935
Maintenance plan (1200/46200*45200)	1174
Total Revenue	$45200

Part D

Date	Account titles and explanation	Debit	Credit
Entries for Ritt –the Consignor
April 25, 2017	Inventory on Consignment (800*100)	80000
	Inventory		80000
June 30, 2017	Cash (60*1200)-(10%*60*1200)	64800
	Commission expense	7200
	Revenue from Consignment Sales		72000
June 30, 2017	Cost of goods sold (800*60)	48000
	Inventory on Consignment		48000
Entries for Farm Depot - the Consignee
April 25, 2017	No entry
June 30, 2017	Accounts payable	64800
	Cash		64800