Answer:
June 1, 2021
No entry – neither party has performed under the contract.
August 1,2021
Dr. Cash $4,000
Dr. Accounts Receivable $700
Cr. Unearned Service Revenue $1,085
Cr. Sales revenue $3,615
Dr. Cost of goods Sold $2,300
Cr. Inventory $2,300
Explanation:
As no one performed under the contract on June 1, 2021, so there will be no entry on this day.
On August 1, 2021, Windsor has 2 performance obligations
First: Delivery of the windows
&
Second: Installation of the windows
Fair value of Windows = $4,000
Fair value of Installation services = $1,200
Fair Value of Contract = $4,000 + $1,200 = $5,200
Allocation of to revenue is based on the ratio of fair value of each performance to the total fair value of contract, As below
Windows = ($4,000 / $5,200) X $4,700 = $3,615 (round to nearest dollar)
Installation services = ($1,200/$5,200) X $4,700 = $1,085 (round to nearest dollar)
Total Revenue recognized = $4,700
