Question

Sandhill Company manufactures equipment. Sandhill's products range from simple automated machinery to complex systems containing numerous components. Unit selling prices range from $265,000 to $1,550,000, and are quoted inclusive of installation. The installation process does not involve changes to the features of the equipment to perform to specifications. Sandhill has the following arrangement with Winkerbean Inc. • Winkerbean purchases equipment from Sandhill on May 2, 2020, for a price of $1,168,500 and contracts with Sandhill to install the equipment. Sandhill charges the same price for the equipment irrespective of whether it does the installation or not. Using market data, Sandhill determines that the installation service is estimated to have a fair value of $61,500. The cost of the equipment is $700,000. • Winkerbean is obligated to pay Sandhill the $1,107,000 upon delivery of the equipment and the balance on the completion of the installation Sandhill delivers the equipment on June 1, 2020, and completes the installation of the equipment on September 30, 2020. Assume that the equipment and the installation are two distinct performance obligations that should be accounted for separately.

Answer 1

) Delivery Equipment - ( 1168500 )x1162500 (1168,500 + 61,500 -1168.500_) x$!168500 1230000)^ = $1110,075 Installation - ( 61,500 ) $1163500 (61,50066 ) * $1168500 3000 2 - $ 58,425 Journal entries for sandbill Particolar Debit Credit sute Dale May 2, No Entey No enley 2020

Dale Credit 2020 1,110,075 58,425 2026 700000 - Particular Ionely Accoonts Receivable 1,168,500 : sales Revenue TiUnearned Service Revenue Cto record sales] Jonel, cost of goods sold 700000 I Inventory (to record Cost of goods sold] sep 30, unewined service Revenue 58,425 Service Revenue [to record service Revenue] sep 30, cash 2020 Accounts Receivable to record Collection on account 2020 58425 11168500 1168,500