Question

Luke Glass manufactures and sells custom storm windows for enclosed porches. Luke also provides installation service for the windows. The installation process does not involve changes in the windows, so this service can be provided by other vendors. Luke enters into the following contract on June 1, 2018, with a local homeowner. The customer purchases windows for a price of $4,700 and chooses Luke to do the installation. Luke charges the same price for the windows irrespective of whether it does the installation or not. The price of the installation service is estimated to have a fair value of $1,200. The customer pays Luke $4,000 (which equals the fair value of the windows, which have a cost of $2,300) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on August 1, 2018, Luke completes installation on September 15, 2018, and the customer pays the balance due. Prepare the journal entries for Luke in 2018. (Round amounts to nearest dollar.)

you should have multiple journal entries and potentially multiple performance obligations. Please show your work

Answer 1

The journals entries for Luke in 2018

Date	Particular	Debit $	Credit $
June 1, 2018	No entry for the contact	-	-
August 1, 2018	Cash Account Dr	$4,000
	Accounts Receivable Account Dr	$700
	Sales Revenue Cr [$4,000 / ($4,000 + $1,200) * $4,700]		$3,615
	Unearned Sales Revenue Cr [$1200 / ($4,000 + $1,200) * $4,700]		$1,085
	( Sale of windows is recognized and the installation charge is deferred)
August 1, 2018	Cost of Goods Sold Account   Dr	$2,300
	Inventory Account Cr		$2,300
	(Cost of goods sold for windows is recorded)
September 15, 2018	Cash Account   Dr	$700
	Unearned Service Revenue Account   Dr	$1,085
	Accounts Receivable Account Cr		$700
	Service Revenue Account   Cr		$1,085
	(Service installation is rendered and the balance amount of accounts receivable is received)