Question

Carla 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 Carla's products. Pricing and cost information on three of Carla's most popular products are as follows. Item Mini-trencher Power fence hole auger Grain/hay dryer Standalone Selling Price (Cost) $ 3,700 $2,100 ) 1,300 (700) 13,000 (11,800 ) Respond to the requirements related to the following independent revenue arrangements for Carla Ranch & Farm. Carla sells three grain/hay dryers to a local farmer at a total contract price of $42,000. In addition to the dryers, Carla provides installation, which has a standalone selling price of $900 per unit installed. The contract payment also includes a $1,400 maintenance plan for the dryers for 3 years after installation. Carla signs the contract on June 20, 2020, and receives a 20% down payment from the farmer. The dryers are delivered and installed on October 1, 2020, and full payment is made to Carla. Prepare the journal entries for Carla in 2020 related to this arrangement. (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 o for the amounts. Round answers to o decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit Jun. 20, 2020 TCash 8400 TAccounts Receivable ble 1 33600 Tunearned Service Revenue Unearned Service Revenue TUnearned Sales Revenue Toct. 1, 2020 Cash 2 Accounts Receivable (To record payment received) Unearned Service Revenue Unearned Sales Revenue Service Revenue Sales Revenue (To record sales) TCost of Goods Sold Inventory (To record cost of goods sold) TDec. 31, 2020 TUnearned Service Revenue

Answer 1

Credit Debit 8400 33600 Date Account titles June 20,2020 Cash Accounts Receivable Unearned Service Revenue Unearned Service Revenue Unearned Sales Revenue 1400 Total Contract price= $42000 Down payment 20-6-2020 = 42000*0.2 = $ 8400 Accounts Receivable= 42000-8400 = $ 33600 2700 37900 Oct 1, 2020 33600 Cash Accounts Receivable (To record payments received) 33600 Cost of maintenance plan(3 years) = $ 1400 Installation charges = $ 900*3 units = $ 2700 Sales revenue = 42000-1400-2700 = $ 37900 2700 37900 Unearned Service Revenue Unearned Sales Revenue Service Revenue Sales Revenue (To record sales) 2700 37900 Cost of goods sold = 11800*3 = $ 35400 35400 Cost of goods sold Inventory (Cost of goods sold) 35400 Maintenance plan charges is collected for 3 years from the installation date Oct 1,2020. i.e. till 30 Sep, 2023, so it is to be transferred to sales income in proportionate to the time period lapsed. Charges for 1 year= 1400/3 = $ 467 Charges for 1 quarter(Oct-Dec)= 467/4 = $ 117 (Rounded off) 1171 Dec 31, 2020 Unearned Service Revenue Sales Revenue 117