Question

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

Answer 1

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