Question

Crane Company sells goods that cost $316,000 to Ricard Company for $440,000 on January 2, 2017. The sales price includes an installation fee, which has a standalone selling price of $43,000. The standalone selling price of the goods is $397,000. The installation is considered a separate performance obligation and is expected to take 6 months to complete. (a) Prepare the journal entry (if any) to record the sale on January 2, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

Answer 1

Crane Company

Journal entries

2 Jan 2017 Debit Bank $440000 Credit Revenue $397000 Credit Unearned Revenue $43000

Step-by-step explanation:

steps to recording revenue income

1. there must be a contract, hence the sale

2. There must be performance obligation ( sale of goods and the installation) there are two performance obligations as per the question.

3. There must be transaction price, the transaction price is $440000

4. Allocate the transaction price to the performance obligation(s). The performance of selling goods is $397000 and installing is $43000

5. Record revenue when performance obligation is satisfied and the only satisfied obligation here is the sale, the installation will only be satisfied after 6 months therefore revenue at 02 Jan is still unearned until completion of the installation.