a. Grill Master offers contract GM205, which is comprised of a free-standing gas
ID: 2455990 • Letter: A
Question
a. Grill Master offers contract GM205, which is comprised of a free-standing gas grill for small patio use plus installation to a customer’s gas line for a total price $830. On a standalone basis, the grill sells for $730 (cost $400), and Grill Master estimates that the fair value of the installation service (based on cost-plus estimation) is $140. Grill Master signed 8 GM205 contracts on April 20, 2014, and customers paid the contract price in cash. The grills were delivered and installed on May 15, 2014. Prepare journal entries for Grill Master for GM205 in April and May 2014.
b. The State of Kentucky is planning major renovations in its parks during 2014 and enters into a contract with Grill Master to purchase 440 durable, easy maintenance, standard charcoal grills during 2014. The grills are priced at $195 each (with a cost of $165 each), and Grill Master provides a 5% volume discount if Kentucky purchases at least 295 grills during 2014. On April 17, 2014, Grill Master delivered and received payment for 270 grills. Based on prior experience with the State of Kentucky renovation projects, the delivery of this many grills makes it certain that Kentucky will meet the discount threshold. Prepare the journal entries for Grill Master for grills sold on April 17, 2014.
C.Grill Master sells its specialty combination gas/wood-fired grills to local restaurants. Each grill is sold for $1,100 (cost $615) on credit with terms 3/30, net/90.
Prepare the journal entries for the sale of 21 grills on September 1, 2014, and upon payment, assuming the customer paid on September 25, 2014. Assume the company records sales net.
d. Grill Master sells its specialty combination gas/wood-fired grills to local restaurants. Each grill is sold for $1,100 (cost $615) on credit with terms 3/30, net/90.
Prepare the journal entries for the sale of 21 grills on September 1, 2014, and upon payment, assuming the customer paid on October 15, 2014. Assume the company records sales net.
e.On October 1, 2014, Grill Master sold one of its super deluxe combination gas/charcoal grills to a local builder. The builder plans to install it in one of its “Parade of Homes” houses. Grill Master accepted a 3-year, zero-interest-bearing note with face amount of $5,300. The grill has an inventory cost of $2,625. An interest rate of 12% is an appropriate market rate of interest for this customer.
Explanation / Answer
a)
April 20, 2014
Cash Dr 6640
Advance from customers Cr 6640
( To record signing and receiving cash for 8 contract ie 8 * 830)
May 14, 2014
Advance from customers Dr 6640
Revenue Cr 6640
( To record revenue at the time of delivery and installation)
May 14, 2014
Cost of goods sold Dr 4320
Purchases Cr 4320
( To record COGS @ 400 + 140 for 8 contracts)
b) April 17 , 2014
Cash Dr 50017.50
Discount Dr 2632.50
Revenue Cr 52650
( To book revenue on 270 grills @ 195 per grill)
Cost of goods sold Dr 44550
Purchases Cr 44550
( to record COGS for 270 grills @ 165 each)
c) September 1 , 2014
Account receivable Dr 23100
Revenue Cr 23100
( to record sale of 21 grills @ 1100 per grill)
Cost of goods sold Dr 12915
Purchases CR 12915
( To record COGS of 21 grills @ 615)
September 25 , 2014
Cash Dr 22407
Discount Dr 693
Account receivable 23100
( to record cash received and discount of 3%)
d) September 1, 2014
Account receivable Dr 23100
Revenue Cr 23100
( to record sale of 21 grill @ 1100 each)
COGS Dr 12915
Purchases Cr 12915
( to record COGS for 21 grill @ 615 each)
October 15
Cash Dr 23100
Account receivable CR 23100
( To record amount received)
e) October 1 2014
Note receivable Dr 5300
Revenue Cr 5300
( to record sale of grill in lieu of a note)
COGS Dr 2625
Inventory Cr 2625
( to record cost of the grill)
No entry for interest as note is 0 interest bearing
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