On August 22, 2021, Crane Manufacturing sold on account one of its Model S14 bulldozer including...
On August 22, 2021, Crane Manufacturing sold on account one of
its Model S14 bulldozer including a 5-year service contract for
$222,000. The stand-alone price of the equipment is $176,400 and
the other service contract sells separately for $75,600.
Prepare the appropriate journal entry for the transaction. Ignore
cost of goods sold entry. (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.)
Curious to the workings.
Homework Answers
Model S14 bulldozer selling price including 5-year service contract = $222,000
Stand-alone price of the equipment = $176,400
Service contract price = $75,600
Total price of the equipment with service contract = $176,400 + $75,600 = $252,000
Now, as the equipment is sold with the service contract at a price of $222,000, therefore, it is to be adjusted to figure out the amount to be recorded for equipment sale and the service contract sale.
Amount to be recorded for equipment sale = Selling price with service contract * Stand-alone price of the equipment / Total price of the equipment and service contract = $222,000 * $176,400 / $252,000 = $155,400
Amount to be recorded for service contract = $222,000 - Amount to be recorded for equipment sale = $222,000 - $155,400 = $66,600
Journal entry
| Account, Titles and Explanation | Debit | Credit |
| Accounts Receivable | $222,000 | |
| Sales revenue | $155,400 | |
| Service Contract Revenue | $66,600 |
Add Answer to:
On August 22, 2021, Crane Manufacturing sold on account one of
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