Problem 18-04 Bridgeport Appliance Co. manufactures low-price, no-frills appliances that are in great demand for rental units. Pricing and cost information on Bridgeport’s main products are as follows. Item Standalone Selling Price (Cost) Refrigerator $500 ($260 ) Range 570 (270 ) 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 $1,800. The bundle price includes delivery and installation. Bridgeport also provides installation (not a separate performance obligation). Respond to the requirements related to the following independent revenue arrangements for Bridgeport Appliance Co. 1. On June 1, 2020, Bridgeport 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. Bridgeport 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, 2020. Account Titles and Explanation Debit Credit (To record sales) (To record cost of goods sold)
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3. 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, 2020. YellowCard offers a 10% bonus payment if Bridgeport can complete installation by July 1, 2020. Bridgeport 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, 2020
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Date |
Account Titles and Explanation |
Debit |
Credit |
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May 1, 2020 |
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Jul. 1, 2020 |
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(To record sales) |
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(To record cost of goods sold) |
4. Epic Rentals would like to take advantage of the bundle price for its 430-unit project; on February 1, 2020, Bridgeport signs a contract with Epic for 430 bundles. Under the agreement, Bridgeport 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, 2020, Bridgeport completes manufacture of the appliances in the Epic bundle order and places them in the warehouse. Bridgeport and Epic have documented the warehouse arrangement and identified the units designated for Epic. The units are ready to ship, and Bridgeport may not sell these units to other customers. Prepare journal entries for Bridgeport on (1) February 1, 2020, and (2) April 1, 2020.
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