Question

Sunland Inc. sells storage structures of various sizes to homeowners and businesses. Respond to the requirements related to the following independent revenue arrangements for Sunland products and services. Collapse question part (a) Sunland offers building R400, mainly to homeowners. Sunland will also install the building for the customer. The price for Sunland to deliver and install an R400 is $6,100. On a standalone basis, the building sells for $5,900 (cost $3,300), and Sunland estimates that the standalone selling price of the installation service (based on cost-plus estimation) is $600. (The selling of the building and the installation services are considered two performance obligations.) Sunland signed 16 contracts to deliver and install R400s on April 5, 2017. Customers paid the contract price in cash. The buildings were delivered and installed during May 2017. Prepare journal entries for Sunland for R400 in April and May 2017. (Round intermediate calculations to 6 decimal places, e.g. 1.246871 and final answers to 0 decimal places, e.g. 5,125. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select

Answer 1

In the given case company has entered into a contract on 5th April 2017 to deliver and install homebuilding R400 and received cash from it's customer. However, actual performance obligation that is delivery and installation is to take place in the month of May 2017, and thus, in May 2017 only revenue will be recognised.

This, entries for the month of April 2017 when cash is received without performing any service and in May 2017 when service is being actually performed shall be as follows :-

Apt 2017 cash a/c . Dr . 97600(6100x16)

To unearned revenue a/c . 97600

May 2017 . Unearned revenuea/c . Dr. 97600

To revenue a/c. 97600