Question

Pharoah Inc. sells storage structures of various sizes to homeowners and businesses. Respond to the requirements related to the following independent revenue arrangements for Pharoah products and services. Pharoah offers building R400, mainly to homeowners. Pharoah will also install the building for the customer. The price for Pharoah to deliver and install an R400 is $6,200. On a standalone basis, the building sells for $6,000 (cost $3,500), and Pharoah estimates that the standalone selling price of the installation service (based on cost-plus estimation) is $500. (The selling of the building and the installation services are considered two performance obligations.) Pharoah signed 18 contracts to deliver and install R400s on April 5, 2017. Customers paid the contract price in cash. The buildings were delivered and installed during May 2017. Prepare journal entries for Pharoah for R400 in April and May 2017. (Round intermediate calculations to 6 decimal places, e.g. 1.246871 and final answers to O decimal places, eg. 5,125. Credit account titles are automatically indented when 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.) AcCount Titles and Explanation Credit Debit Date Apr. 5, 2017 May, 2017 (To record sales) (To record cost of goods sold)

Answer 1

Answer to part 1
In the books of Pharoah Inc.
Journal Entries
Date	Description	Debit	Credit
2017
Apr-05	Cash	$ 1,11,600
	Unearned Sales revenue		$ 1,11,600
	(being cash received from customers)
May	Unearned Sales revenue	$ 1,11,600
	Service Revenue		$ 1,11,600
	(to record sales)
May	Cost of goods sold	$    63,000
	Inventory		$    63,000
	(to record cost of goods sold)
Note-
The buildings were delivered and installed in the month may 2017. Hence performance obligation is completed in the month may and therefore Sale or revenue will be recognised in may. Mere signing the contract is not sufficient to recognise the revenue.Therefore cash received from customers in the month April will be treated as Unearned revenue till the buildings are not delivered and installed.
Answer to part 2
In the books of Pharoah Inc.
Journal Entries
Date	Description	Debit	Credit
2017
Jul-19	Accounts Receivable (60*9800*96%)	$ 5,64,480
	Sales revenue		$ 5,64,480
	(ro record net sale)
Jul-19	Cost of goods sold	$ 4,08,000
	Inventory		$ 4,08,000
	(to record cost of goods sold)
Aug-05	Cash	$ 5,64,480
	Accounts Receivable (60*9800*96%)		$ 5,64,480
	(being payments received)
Answer to part 3
In the books of Pharoah Inc.
Journal Entries
Sep-01	Note receivable	$    67,000
	Discount on note	$    24,153
	Sales Revenue		$    91,153
	(to record sales with zero interest note)
	Cost of goods sold	$    32,000
	Inventory		$    32,000
	(to record cost of goods sold)
Dec-31	No entry
Calculation of discount on note
Face value = $91153
Interest rate =8%
Time =4 years
Present Value = Face value/(1+rate of interest)^time
	=91153/(1+.08)^4
	=67000.17617