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2 years ago

ABC Ranch & Farm is a distributor of ranch and farm equipment. Its products range from small

Business

1 answer:

scoundrel [369]2 years ago

5 0

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

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