Bonita Ranch & Farm is a distributor of ranch and farm equipment. Its products range from small tools, power equipment for trench-digging and fencing, grain dryers, and barn winches. Most products are sold direct via its company catalog and Internet site. However, given some of its specialty products, select farm implement stores carry Bonita’s products. Pricing and cost information on three of Bonita’s most popular products are as follows. StandaloneItemSelling Price (Cost)$ 3,700 ($2,100)Mini-trencherPower fence hole auger1,300(700 )Grain/hay dryer13,000 (11,800)Respond to the requirements related to the following independent revenue arrangements for Bonita Ranch & Farm.(a)On January 1, 2020, Bonita sells 50 augers to Mills Farm & Fleet for $65,000. Mills signs a 6-month note at an annual interestrate of 12%. Bonita allows Mills to return any auger that it cannot use within 50 days and receive a full refund. Based on priorexperience, Bonita estimates that 5% of units sold to customers like Mills will be returned (using the most likely outcomeapproach). Bonita's costs to recover the products will be immaterial, and the returned augers are expected to be resold at aprofit. Prepare the journal entry for Bonita on January 1, 2020. (Credit account titles are automatically indented when the amount isentered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter O for the amounts.)Account Titles and ExplanationDebitCredit(To record sales)

Journal entry is a record of financial transactions in the books of accounts of a business. It…

Answered: Bonita Ranch & Farm is a distributor of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Bonita Ranch & Farm is a distributor of ranch and farm equipment. Its products range from small tools, power equipment for trench-digging and fencing, grain dryers, and barn winches. Most products are sold direct via its company catalog and Internet site. However, given some of its specialty products, select farm implement stores carry Bonita’s products. Pricing and cost information on three of Bonita’s most popular products are as follows.

Standalone
Item
Selling Price (Cost)
$ 3,700 ($2,100)
Mini-trencher
Power fence hole auger
1,300
(700 )
Grain/hay dryer
13,000 (11,800)
Respond to the requirements related to the following independent revenue arrangements for Bonita Ranch & Farm.
(a)
On January 1, 2020, Bonita sells 50 augers to Mills Farm & Fleet for $65,000. Mills signs a 6-month note at an annual interest
rate of 12%. Bonita allows Mills to return any auger that it cannot use within 50 days and receive a full refund. Based on prior
experience, Bonita estimates that 5% of units sold to customers like Mills will be returned (using the most likely outcome
approach). Bonita's costs to recover the products will be immaterial, and the returned augers are expected to be resold at a
profit. Prepare the journal entry for Bonita on January 1, 2020. (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 O for the amounts.)
Account Titles and Explanation
Debit
Credit
(To record sales)

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