Question

Windsor Windows manufactures and sells custom storm windows for enclosed porches. Windsor 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. Windsor 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 Windsor to do the installation. Windsor 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 Windsor $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, Windsor completes installation on September 15, 2018, and the customer pays the balance due. Prepare the journal entries for Windsor in 2018. (Round amounts to nearest dollar.)

Answer 1

Date	Journal Entry	Debit	Credit
1 June, 2018	No Entry
1 Aug, 2018	Windows	$4,000
	Installation	$1,200

	Total	$5,200
	Allocation:
	Windows (4000/5200*4700)	$3,615
	Installment (1200/5200*4700)	$1,085
	Revenue Recognized	$4,700
	Cash	$4,000
	Accounts Receivable	$700

	To unearned service revenue		$1,085
	To sales revenue		$3,615
	Cost of goods sold	$2,300
	To Inventory		$2,300
15 Sept, 2018	Cash	$700

	Unearned Service Revenue	$1,085
	To service revenue installation		$1,085
	To Accounts Receivable		$700

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