Martinez Appliance Co. manufactures low-price, nofrills appliances that are in great demand for rental units. Pricing and cost information on Martinez’s main products are as follows.
Item Standalone Selling Price (Cost) Refrigerator $510 ($270 ) Range 570 (280 ) Stackable washer/dryer unit 690 (400 )
Customers can contract to purchase either individually at the stated prices or a three-item bundle with a price of $1,810. The bundle price includes delivery and installation. Martinez also provides installation (not a separate performance obligation).
Respond to the requirements related to the following independent revenue arrangements for Martinez Appliance Co.
On June 1, 2017, Martinez sold 100 washer/dryer units without installation to Laplante Rentals for $69,000. Laplante is a newer customer and is unsure how this product will work in its older rental units. Martinez offers a 60-day return privilege and estimates, based on prior experience with sales on this product, 4% of the units will be returned. Prepare the journal entries for the sale and related cost of goods sold on June 1, 2017.
(Credit account titles are automatically indented when the 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.)
Account Titles and Explanation Debit Credit
(To record sales)
(To record cost of goods sold)
YellowCard Property Managers operates upscale student apartment buildings. On May 1, 2017, Martinez signs a contract with YellowCard for 330 appliance bundles to be delivered and installed in one of its new buildings. YellowCard pays 20% cash at contract signing and will pay the balance upon installation no later than August 1, 2017. Prepare journal entries for Martinez on (1) May 1, 2017, and (2) August 1, 2017, when all appliances are installed.
(Credit account titles are automatically indented when the 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.) No.
Date Account Titles and Explanation Debit Credit
(1) May 1, 2017
(2) Aug. 1, 2017
(To record sales)
(To record cost of goods sold)
Refer to the arrangement in part (b). It would help YellowCard secure lease agreements with students if the installation of the appliance bundles can be completed by July 1, 2017. YellowCard offers a 10% bonus payment if Martinez can complete installation by July 1, 2017. Martinez estimates its chances of meeting the bonus deadline to be 90%, based on a number of prior contracts of similar scale. Repeat the requirement for part (b), given this bonus provision. Assume installation is completed by July 1, 2017.
(Credit account titles are automatically indented when the 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.)
Date Account Titles and Explanation Debit Credit
May 1, 2017
Jul. 1, 2017
(To record sales)
(To record cost of goods sold)
Epic Rentals would like to take advantage of the bundle price for its 370-unit project; on February 1, 2017, Martinez signs a contract with Epic for 370 bundles. Under the agreement, Martinez will hold the appliance bundles in its warehouses until the new rental units are ready for installation. Epic pays 10% cash at contract signing. On April 1, 2017, Martinez completes manufacture of the appliances in the Epic bundle order and places them in the warehouse. Martinez and Epic have documented the warehouse arrangement and identified the units designated for Epic. The units are ready to ship, and Martinez may not sell these units to other customers.
Prepare journal entries for Martinez on (1) February 1, 2017, and (2) April 1, 2017.
(Credit account titles are automatically indented when the 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.)
Date Account Titles and Explanation Debit Credit
Feb. 1, 2017
Apr. 1, 2017
(To record sales)
(To record cost of goods sold)
In order to pass the journal entries for sale, debit the accounts receivable and credit sales account as follows with the amount of total sales value:
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General Journal |
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Date |
Account title and explanation |
Ref |
Debit |
Credit |
|
1-Jul |
Accounts receivable |
$69,000.00 |
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Sales |
$69,000.00 |
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|
(To record credit sales) |
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Now pass the journal entry for cost of goods sold by debiting cost of goods sold and crediting the amount of merchandize inventory – washer/ dryer with the cost of washer/ dryers
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General Journal |
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Date |
Account title and explanation |
Ref |
Debit |
Credit |
|
1-Jul |
Cost of goods sold (400X100) |
$40,000.00 |
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Merchandize inventory - Washer/ Dryer |
$40,000.00 |
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(To record cost of goods sold of washer/ dryer) |
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