Question

Vaughn Windows manufactures and sells custom storm windows for three-season porches. Vaughn 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. Vaughn enters into the following contract on July 1, 2017, with a local homeowner. The customer purchases windows for a price of $2,410 and chooses Vaughn to do the installation. Vaughn 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 $610. The customer pays Vaughn $2,020 (which equals the standalone selling price of the windows, which have a cost of $1,140) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2017, Vaughn completes installation on October 15, 2017, and the customer pays the balance due.

Prepare the journal entries for Vaughn in 2017. (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 0 for the amounts. Round answer to 0 decimal places, e.g. 5,125.)

Date	Account Titles and Explanation	Debit	Credit
Jul. 1, 2017
	(To record contract entered into)
Sep. 1, 2017
	(To record sales)
	(To record cost of goods sold)
Oct. 15, 2017

Answer 1

SOLUTION

Date	Accounts titles and Explanation	Debit ($)	Credit ($)
Jul.1, 2017	No entry	0
	No entry		0
Sep.1, 2017	Cash	2,020
	Accounts receivable	390
	Unearned service revenue		559
	Sales Revenue		1,851
	(To record sales)
	Cost of goods sold	1,140
	Inventory		1,140
	(To record cost of goods sold)
Oct.15, 2017	Cash	390
	Unearned service revenue	559
	Service revenue		559
	Accounts receivable		390

Windows - 2,020

Installation - 610

Total = 2,020 + 610 = 2,630

Allocation

Particulars	Amount ($)
Installation (610/2,630*2,410)	559
Windows (2,020/2,630*2,410)	1,851
Revenue recognized	2,410