Question

Arrow Co. entered into a contract with a customer for $350,000. The contract is for the...

Arrow Co. entered into a contract with a customer for $350,000. The contract is for the delivery of equipment and a 3-year service maintenance contract for the equipment. Arrow sells separately the equipment for a selling price of $328,000, and the maintenance contract for three years for $89,900. The equipment was delivered on 1 June 1 20X1. Arrow has a 30 November year-end.

Required:
Prepare the journal entries required to record the revenue related to this contract during the period 1 June 20X1 to 30 November 20X1. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round percentage answers to nearest whole percent. Round final answer to the nearest whole dollar. )

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Answer #1
Journal Entry  
Date Detail Debit Credit
01.06.20X1 Cash $350,000
To Sale of Equipment $328,000
To Maintance Contract ( 350000-328000) $22,000
( Sale of wequioment with 3 Year warranty)
30-11-20X1 sale of Equipment $328,000
P&L $328,000
( Revenue Booked)
30-11-20X1 Maintainace Contract Amount charge $22,000
Discount on Maintainance Contract $67,900
Provision for Maintainace for 3 year $89,900
( Provision for 3 Year maintainace contract created and Discout booked according market rate)
P&L A/c Dr. $67,900
To Discount on Maintainace contract $67,900
( Discount booked in PL A/c)
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