Answer:
ABC Ranch & Farm
a. Journal Entries:
Jan. 1, 2019:
Debit Notes receivable (Mills Farm & Fleet) $48,000
Credit Refund liability ($48,000 * 5%) $2,400
Credit Sales revenue $45,600
To record the sale of 40 augers for a 6-month note at 12% interest.
January 1, 2019:
Debit Cost of goods sold $30,400
Credit Inventory $30,400
To record the cost of goods sold, less estimated return of 5%.
b. Journal Entries:
August 10, 2019:
Debit Accounts Receivable $57,600
Credit Sales revenue $57,600
To record the sale of 16 mini trenchers to a farm co-op.
August 10, 2019:
Debit Cost of goods sold $32,000
Credit Inventory $32,000
To record the cost of goods sold.
June 20, 2019:
Debit Cash Account $9,040
Credit Deferred Revenue $9,040
To record the receipt of the down payment.
October 1, 2019:
Debit Deferred Revenue $9,040
Credit Sales Revenue $9,040
To record revenue for goods sold.
Debit Cash Account $36,160
Credit Sales Revenue $32,051
Credit Service Revenue (Installation) $2,935
Credit Service Revenue (Maintenance) $1,174
To record the receipt of full payment for goods sold and installation and maintenance services.
December 31, 2019:
Debit Service Revenue (Maintenance) $1,076
Credit Deferred Revenue $1,076
To record the deferred revenue for maintenance.
Explanation:
A) Data and Calculations:
Item Standalone selling
Price (cost)
Mini -trencher $3,600 ($2,000)
Power fence hole auger $1,200 ($800)
Grain/ Hay dryer $14,000 ($11,000)
Sale of grain/hay dryers: Allocation of Contract
Price of $45,200
Sale revenue $14,000 * 3 = $42,000 $41,091 (42,000/46,200 * 45,200)
Installation fee $1,000 * 3 = 3,000 2,935 (3,000/46,200 * 45,200)
Maintenance fee for 3 years 1,200 1,174 (1,200/46,200 * 45,200)
Total $46,200 $45,200
June 20, Down payment ($45,200 * 20%) = $9,040
October 1, Full payment ($45,200 * 80%) = $36,160
Total payment $45,200
Maintenance fee:
Deferred Revenue (1,174*33/36) = $1,076
Maintenance fee revenue (1,174* 3/36) = $98
