Question

Concord Windows manufactures and sells custom storm windows for three-season porches. Concord also provides installation service for the windows. The installation process does not involve changes in the windows, so this service can be performed by other vendors. Concord enters into the following contract on July 1, 2020, with a local homeowner. The customer purchases windows for a price of $2,360 and chooses Concord to do the installation. Concord charges the same price for the windows irrespective of whether it does the installation or not. The installation service is estimated to have a standalone selling price of $620. The customer pays Concord $1,920 (which equals the standalone selling price of the windows, which have a cost of $1,100) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2020, Concord completes installation on October 15, 2020, and the customer pays the balance due.

Prepare the journal entries for Geraths in 2020. (Round amounts to nearest dollar.)

Answer 1

Concord enters into the following contract on July 1, 2020, with a local homeowner for a price of $2,360.

There will be no Journal entry

On September 1, 2020

Windows = $1,920

Installation = $620

Total = $2,540

Particulars Amount

Installation $576

($620/ $2,540) * $2,360

Windows $1,784

($1,920 / $2,540) * $2,360

Revenue recognized $2,360

Date Account details Debit$ Credit$

Sep 1,2020 Cash 1,920

Account receivable 440

Unearned service revenue 576

Sales revenue 1,784

Cost of goods sold 1100

Inventory 1100

15 Oct,2020 Cash 440

Unearned service revenue 576

Service revenue (installation) 576

Account receivable 440

(Revenue recognized after service provided)