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Chapter 18: Question E18-10 (page 1036)

(Allocate Transaction Price) Geraths Windows manufactures and sells custom storm windows for three-season porches. Geraths 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. Geraths enters into the following contract on July 1, 2017, with a local homeowner. The customer purchases windows for a price of \(2,400 and chooses Geraths to do the installation. Geraths charges the same price for the windows irrespective of whether it does the installation or not. The installation service is estimated to have a standalone selling price of \)600. The customer pays Geraths \(2,000 (which equals the standalone selling price of the windows, which have a cost of \)1,100) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2017, Geraths completes installation on October 15, 2017, and the customer pays the balance due. Prepare the journal entries for Geraths in 2017. (Round amounts to nearest dollar.)

Short Answer

Expert verified

The total revenue earned by Geraths is $2,400.

Step by step solution

01

Meaning of Standalone Selling Price

Standalone selling price is the price at which a company will sell a product or serviceto a single consumer. This requires setting an adequate selling price for a product or service with some percentage of the profit.

02

Journal entries for Geraths in 2017

Date

Particular

Debit ($)

Credit ($)

July 1, 2017

No entry

September 1, 2017

Cash a/c

2,000

Accounts receivables a/c

400

To Unearned service revenue a/c

554

To Sales revenue a/c

1,846

September 1, 2017

Cost of goods sold a/c

1,100

To Inventory a/c

1,100

October 15, 2017

Cash a/c

400

To Accounts receivables a/c

400

October 15, 2017

Unearned service revenue a/c

554

To Service revenue a/c

554

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Most popular questions from this chapter

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Instructions

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