Pharoah Company sells goods that cost $320,000 to Ricard Company for $407,000 on
ID: 2607536 • Letter: P
Question
Pharoah Company sells goods that cost $320,000 to Ricard Company for $407,000 on January 2, 2017. The sales price includes an installation fee, which has a standalone selling price of $42,000. The standalone selling price of the goods is $365,000. The installation is considered a separate performance obligation and is expected to take 6 months to complete.
(a) Prepare the journal entry (if any) to record the sale on January 2, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
(b) Pharoah prepares an income statement for the first quarter of 2017, ending on March 31, 2017 (installation was completed on June 18, 2017). How much revenue should Pharoah recognize related to its sale to Ricard?
Date
Account Titles and Explanation
Debit
Credit
Jan. 2, 2017 Jan. 2, 2017Explanation / Answer
Answer a The journal entry to record the sale on January 2, 2017 Date Account Titles and Explanation Debit Credit Jan.2,2017 Accounts Receivables $407,000 Sales Revenue $365,000 Unearned Sales Revenue $42,000 Jan.2,2017 Cost of goods sold $320,000 Inventory $320,000 Answer b An income statement for the first quarter of 2017, ending on March 31, 2017 Sales Revenue $365,000 Less : Cost of goods sold $320,000 Gross Profit $45,000
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