Question

Vaughn Windows manufactures and sells custom storm windows for three-season porches. Vaughn also provides installation service for the windows. The installation process does not involve changes in the windows, so this service can be performed by other vendors. Vaughn enters into the following contract on July 1, 2017, with a local homeowner. The customer purchases windows for a price of $2,400 and chooses Vaughn to do the installation. Vaughn charges the same price for the windows irrespective of whether it does the installation or not. The installation service is estimated to have a standalone selling price of $610. The customer pays Vaughn $2,080 (which equals the standalone selling price of the windows, which have a cost of $1,050) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2017, Vaughn completes installation on October 15, 2017, and the customer pays the balance due Prepare the journal entries for Vaughn in 2017. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. I mentry wire, select "No entry" for the account titles and enter for the amounts, Round answer to decimal places, 5.125.) Date Account Titles and Explanation Debit Credit Jul 1, 2017 No Entry No Entry (To record contract entered into) Sep 1, 2017 Accounts Receivable | Uneared Service Revenue Sales Revenue (To record sales) Cost of Goods Sold 1300 Inventory (To record cost of goods sold) Oct 15, 2017 Cash Uneared Service Revenue

Answer 1

Ans:

Journal Entries
Date	Account Title & Explanation	Debit	Credit
01-07-2017	No Entry
	No Entry required for Company enters into Contract
01-09-2017	Cash	$ 2,080.00
	Account Receivable	$ 320.00
	Unearned Service Revenue		$ 544.24
	Sales Revenue		$ 1,855.76
	To Record sale of Windows and Performance Obligation
01-09-2017	Cost of Goods Sold	$ 1,050.00
	Inventory		$ 1,050.00
	To Record Cost of Goods Sold
15-10-2017	Cash	$ 320.00
	Uneraned Service Revenue	$ 544.24
	Service Revenue ( Installation)		$ 544.24
	Account Receivable		$ 320.00
	To Record Receipt of Cash on istallment of Windows

Allocation of Total Performance Obligation
Particular	Performance Obligation(a)	Purchase Price (b)	Allocation of Purchase Price
(a*b)/$2690
Sale of Window	$ 2,080.00	$ 2,400.00	$ 1,855.76
Installation of Windows	$ 610.00	$ 2,400.00	$ 544.24
	$ 2,690.00		$ 2,400.00