Problem 18-06 b-d Sunland Hardware takes pride as the “shop around the corner” that can compete with the big-box home improvement stores by providing good service from knowledgeable sales associates (many of whom are retired local handymen). Sunland has developed the following two revenue arrangements to enhance its relationships with customers and increase its bottom line. 1. Sunland sells a specialty portable winch that is popular with many of the local customers for use at their lake homes (putting docks in and out, launching boats, etc.). The Sunland winch is a standard manufacture winch that Sunland modifies so the winch can be used for a variety of tasks. Sunland sold 60 of these winches during 2020 at a total price of $18,600, with a warranty guarantee that the product was free of any defects. The cost of winches sold is $17,600. The assurance warranties extend for a 3-year period with an estimated cost of $1,800. In addition, Sunland sold extended warranties related to 20 Sunland winches for 2 years beyond the 3-year period for $400 each. 2. To bolster its already strong customer base, Sunland implemented a customer loyalty program that rewards a customer with 1 loyalty point for every $10 of purchases on a select group of Sunland products. Each point is redeemable for a $1 discount on any purchases of Sunland merchandise in the following 2 years. During 2020, customers purchased select group products for $101,000 (all products are sold to provide a 45% gross profit) and earned 10,100 points redeemable for future purchases. The standalone selling price of the purchased products is $101,000. Based on prior experience with incentives programs like this, Sunland expects 9,600 points to be redeemed related to these sales (Sunland appropriately uses this experience to estimate the value of future consideration related to bonus points). 1. Prepare the journal entries for Sunland related to the sales of Sunland winches with warranties. Account Titles and Explanation Debit Credit (To record sales) (To record cost of goods sold) 2.How much additional sales revenue is recognized by Sunland in 2021, assuming 4,400 bonus points are redeemed? (Do not round intermediate calculations. Round final answers to 0 decimal places.)
Problem 18-06 b-d
Sunland Hardware takes pride as the “shop around the corner” that can compete with the big-box home improvement stores by providing good service from knowledgeable sales associates (many of whom are retired local handymen). Sunland has developed the following two revenue arrangements to enhance its relationships with customers and increase its bottom line.
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1. |
Sunland sells a specialty portable winch that is popular with many of the local customers for use at their lake homes (putting docks in and out, launching boats, etc.). The Sunland winch is a standard manufacture winch that Sunland modifies so the winch can be used for a variety of tasks. Sunland sold 60 of these winches during 2020 at a total price of $18,600, with a warranty guarantee that the product was free of any defects. The cost of winches sold is $17,600. The assurance warranties extend for a 3-year period with an estimated cost of $1,800. In addition, Sunland sold extended warranties related to 20 Sunland winches for 2 years beyond the 3-year period for $400 each. |
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2. |
To bolster its already strong customer base, Sunland implemented a customer loyalty program that rewards a customer with 1 loyalty point for every $10 of purchases on a select group of Sunland products. Each point is redeemable for a $1 discount on any purchases of Sunland merchandise in the following 2 years. During 2020, customers purchased select group products for $101,000 (all products are sold to provide a 45% gross profit) and earned 10,100 points redeemable for future purchases. The standalone selling price of the purchased products is $101,000. Based on prior experience with incentives programs like this, Sunland expects 9,600 points to be redeemed related to these sales (Sunland appropriately uses this experience to estimate the value of future consideration related to bonus points). |
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Account Titles and Explanation |
Debit |
Credit |
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(To record sales) |
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(To record cost of goods sold) |
2.How much additional sales revenue is recognized by Sunland in 2021, assuming 4,400 bonus points are redeemed? (Do not round intermediate calculations. Round final answers to 0 decimal places.)
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