Shaw Company sells goods that cost $293,000 to Ricard Company for $448,000 on Ja

Question

Shaw Company sells goods that cost $293,000 to Ricard Company for $448,000 on January 2, 2014. The sales price includes an installation fee, which is valued at $38,000. The fair value of the goods is $410,000. The installation is expected to take 6 months.

(a) Prepare the journal entry to record the sale on January 2, 2014. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Datte

Account Titles and Explanation

Debit

Credit

(b) Shaw prepares an income statement for the first quarter of 2014, ending on March 31, 2014. How much revenue should Shaw recognize related to its sale to Ricard?

Datte

Account Titles and Explanation

Debit

Credit

Explanation / Answer

(a) journal entry to record the sale on January 2, 2014. in Shaw's books Datte Account Titles and Explanation Debit Credit Jan. 2, 2014 Accounts Receivable (Ricard Company) $   4,48,000 Sales $4,10,000 Unearned revenue (Installation Fees) $    38,000 (For sale of goods) Jan. 2, 2014 Cost of goods sold $   2,93,000 Inventory $2,93,000 (for cost of goods sold) (b) Shaw prepares an income statement for the first quarter of 2014, ending on March 31, 2014. How much revenue should Shaw recognize related to its sale to Ricard? Shaw Company Income statement for the quarter ended March 31, 2014 Sales $   4,10,000 Less: Cost of Goods Sold $   2,93,000 Gross Margin $   1,17,000 Note: The revenue to be recognised is $ 410,000 since the installation is expected to take 6 months. The fee collected should be classified as unearned revenue till the installation is completed.

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