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Help Required information [The following information applies to the questions displayed below Hospital Equipment Company (HEC) acquired several fMRI machines for its inventory at a cost of $2.400 per machine. HEC usually sells these machines to hospitals at a price of $5,250. HEC also separately sells 12 months of training and repair services for fMRI machines for $2,250. HEC is paid $5.250 cash on November 30 for the sale of an fMRI machine delivered on December 1. HEC sold the machine at its regular price, but included one year of free training and repair service. 2. Prepare journal entries would HEC record on November 30 and December 1? (Assume HEC uses a perpetual inventory system for recording the cost of goods sold) (If no entry is required for e transection/event, select "No Journel Entry Required" in the first account field.) View transaction list View journal entry worksheet No Date General Joumal Debit Credit 1 November 30 Cash 5.250 Sales Revenue 5,250 December 01 Sales Revenue 7,500 7.500 Prepaid Insurance 388 3 December 01 Cost of Goods Sold 388 Inventory 9ef Next <Prev

Answer 1

Date General Journal Debit Credit Nov-30 Cash $5,250 Unearned Revenue $5,250 $3,675 Dec-01 Uneamed Revenue Sales Revenue $3,675 $2,400 Dec-01 Cost of Goods Sold Inventory $2,400 As per US GAAP Revenue should be recorded on the sale of goods when the goods have been transferred to the seller and all the risks are transferred to the seller and the receipt of the price of goods are measurable. In case of service, it should be recorded when the service has been provided to the service receiver and the price of service is measurable. When free products are offered as part of multiple deliverable transactions, the total consideration should be separated and allocated between the elements in accordance with ASC 605. 25, Revenue Recognition Multiple-Element Arrangements. Since the price of $5,250 includes the cost of both, bifurcation will be done as under:- Revenue for training and repair services = $1,575 ($2,250 a $5,250/$7,500) Revenue from selling price of the machine. = $3,675 ($5,250 $5,250/$7,500)