Question

Sage 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 Sage’s products. Pricing and cost information on three of Sage’s most popular products are as follows.

Item		Standalone Selling Price (Cost)
Mini-trencher		$ 3,900	($2,000	)
Power fence hole auger		1,300	(900	)
Grain/hay dryer		12,900	(11,000	)

Respond to the requirements related to the following independent revenue arrangements for Sage Ranch & Farm.

Correct answer iconYour answer is correct.

On January 1, 2020, Sage sells 40 augers to Mills Farm & Fleet for $52,000. Mills signs a 6-month note at an annual interest rate of 12%. Sage allows Mills to return any auger that it cannot use within 70 days and receive a full refund. Based on prior experience, Sage estimates that 5% of units sold to customers like Mills will be returned (using the most likely outcome approach). Sage’s costs to recover the products will be immaterial, and the returned augers are expected to be resold at a profit. Prepare the journal entry for Sage on January 1, 2020. (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.)

Account Titles and Explanation	Debit	Credit
(To record sales)
(To record cost of goods sold)

eTextbook and Media

List of Accounts

  

  

Partially correct answer iconYour answer is partially correct.

On August 10, 2020, Sage sells 15 mini-trenchers to a farm co-op in western Minnesota on account. Sage provides a 4% volume discount on the mini-trenchers if the co-op has a 15% increase in purchases from Sage compared to the prior year. Given the slowdown in the farm economy, sales to the co-op have been flat, and it is highly uncertain that the benchmark will be met. Prepare the journal entry for Sage on August 10, 2020. (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.)

Account Titles and Explanation	Debit	Credit
(To record sales)
(To record cost of goods sold)

eTextbook and Media

List of Accounts

  

  

Partially correct answer iconYour answer is partially correct.

Sage sells three grain/hay dryers to a local farmer at a total contract price of $41,800. In addition to the dryers, Sage provides installation, which has a standalone selling price of $1,000 per unit installed. The contract payment also includes a $1,200 maintenance plan for the dryers for 3 years after installation. Sage 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 Sage. Prepare the journal entries for Sage 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 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)

Date	Account Titles and Explanation	Debit	Credit
Jun. 20, 2020
Jun. 20, 2020Oct. 1, 2020Dec. 31, 2020
	(To record payment received)
	(To record sales)
	(To record cost of goods sold)
Jun. 20, 2020Oct. 1, 2020Dec. 31, 2020

eTextbook and Media

List of Accounts

  

  

Partially correct answer iconYour answer is partially correct.

On April 25, 2020, Sage ships 110 augers to Farm Depot, a farm supply dealer in Nebraska, on consignment. By June 30, 2020, Farm Depot has sold 70 of the consigned augers at the listed price of $1,300 per unit. Farm Depot notifies Sage of the sales, retains a 10% commission, and remits the cash due Sage. Prepare the journal entries for Sage and Farm Depot for the consignment 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 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
Entries for Sage
Apr. 25, 2020Jun. 30, 2020
Jun. 30, 2020
	(To record payment received)
	(To record sales)
Entries for Farm Depot
Apr. 25, 2020Jun. 30, 2020
	(To record consignment sales)
	(To record payment)
Apr. 25, 2020Jun. 30, 2020