Question

Exercise 18-11 Wildhorse Windows manufactures and sells custom storm windows for three-season porches. Wildhorse 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. Wildhorse enters into the following contract on July 1, 2020, with a local homeowner. The customer purchases windows for a price of $2,510 and chooses Wildhorse to do the installation. Wildhorse charges the same price for the windows irrespective of whether it does the installation or not. The customer pays Wildhorse $1,970 (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, Wildhorse completes installation on October 15, 2020, and the customer pays the balance due. Wildhorse estimates the standalone selling price of the installation based on an estimated cost of $450 plus a margin of 30% on cost. Prepare the journal entries for Wildhorse in 2020.

Answer 1

Working:

Performance Obligation	Standalone selling price	Percent of total standalone price	Allocated transaction price
Sale of windows	1970	77.10%	1935
Installation service ($450 x 1.30)	585	22.90%	575
Total	2555	100.00%	2510

Journal entries:

Date	Account Titles and Explanation	Debit	Credit
July 1, 2020	No Entry	0
	No Entry		0
September 1, 2020	Cash	1970
	Accounts receivable ($2510 - $1970)	540
	Sales revenue		1935
	Unearned service revenue		575
	(To record delivery of windows)
September 1, 2020	Cost of goods sold	1100
	Inventory		1100
	(To record cost of goods sold)
October 15, 2020	Cash	540
	Unearned service revenue	575
	Accounts receivable		540
	Service revenue		575
	(To record installation of windows)