Exercise 18-11 Indigo Windows manufactures and sells custom storm windows for three-season porches. Indigo 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. Indigo enters into the following contract on July 1, 2020, with a local homeowner. The customer purchases windows for a price of $2,520 and chooses Indigo to do the installation. Indigo charges the same price for the windows irrespective of whether it does the installation or not. The customer pays Indigo $2,040 (which equals the standalone selling price of the windows, which have a cost of $1,110) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2020, Indigo completes installation on October 15, 2020, and the customer pays the balance due. Indigo estimates the standalone selling price of the installation based on an estimated cost of $430 plus a margin of 10% on cost. Given uncertainty of finding skilled labor, Indigo is unable to develop a reliable estimate for the standalone selling price of the installation. Prepare the journal entries for Indigo in 2020. Date Account Titles and Explanation Debit Credit Sep. 1, 2020 (To record sales) (To record cost of goods sold) Oct. 15, 2020 (To record payment received)
Exercise 18-11
Indigo Windows manufactures and sells custom storm windows for three-season porches. Indigo 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. Indigo enters into the following contract on July 1, 2020, with a local homeowner. The customer purchases windows for a price of $2,520 and chooses Indigo to do the installation. Indigo charges the same price for the windows irrespective of whether it does the installation or not. The customer pays Indigo $2,040 (which equals the standalone selling price of the windows, which have a cost of $1,110) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2020, Indigo completes installation on October 15, 2020, and the customer pays the balance due.
Indigo estimates the standalone selling price of the installation based on an estimated cost of $430 plus a margin of 10% on cost.
Given uncertainty of finding skilled labor, Indigo is unable to develop a reliable estimate for the standalone selling price of the installation.
Prepare the
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Date |
Account Titles and Explanation |
Debit |
Credit |
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(To record sales) |
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(To record cost of goods sold) |
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(To record payment received) |
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