Geraths Windows manufactures and sells custom storm windows for three-season por
ID: 2456941 • Letter: G
Question
Geraths Windows manufactures and sells custom storm windows for three-season porches. Geraths 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. Geraths enters into the following contract on July 1, 2014, with a local homeowner. The customer purchases windows for a price of $2,810 and chooses Geraths to do the installation. Geraths charges the same price for the windows irrespective of whether it does the installation or not. The price of the installation service is estimated to have a fair value of $610. The customer pays Geraths $2,400 (which equals the fair value of the windows, which have a cost of $1,400) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2014, Geraths completes installation on October 15, 2014, and the customer pays the balance due. Prepare the journal entries for Geraths in 2014. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.)
Date
Account Titles and Explanation
Debit
Credit
July 1, 2014
September 1, 2014
(To record delivery and installation expenses)
(To record cost of goods sold)
October 15, 2014
Date
Account Titles and Explanation
Debit
Credit
July 1, 2014
September 1, 2014
(To record delivery and installation expenses)
(To record cost of goods sold)
October 15, 2014
Explanation / Answer
Journal Entries Date 1-Jul-14 No Entry is required 1-Sep-14 Cash 2,400.00 Slaes Revenue 2,200.00 Service Revenue 200.00 (To record delivery and installation expenses) Cost of Goods Sold 1,400.00 Inventory 1,400.00 (Cost of goods sold recorded) 15-Oct-14 Cash 410.00 Service Revenue 410.00 (Completion of installation services and amount received)
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