(Question and Answer): Problem 18-4 Flounder Appliance Co. manufactures low-price, nofrills appliances that are in great demand for rental units. Pricing and cost

Problem 18-4 Flounder Appliance Co. manufactures low-price, nofrills appliances that are in great demand for rental units. Pricing and cost information on Flounders main products are as follows. Standalone Selling Price (Cost) Item Refrigerator Range Stackable washer/dryer unit $500($260) (270) (400) 550 700 Customers can contract to purchase either individually at the stated prices or a three-item bundle with a price of $1,790. The bundle price includes delivery and installation. Flounder also provides installation (not a separate performance obligation) Respond to the requirements related to the following independent revenue arrangements for Flounder Appliance Co On June 1, 2017, Flounder sold 90 washer/dryer units without installation to Laplante Rentals for $63,000. Laplante is a newer customer and is unsure how this product will work in its older rental units. Flounder offers a 60-day return privilege and estimates, based on prior experience with sales on this product, 4% of the units will be returned. Prepare the journal entries for the sale and related cost of goods sold on June 1, 2017. (Credit account titles are automatically indented when the 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.) Account Titles and Explanation Debit Credit To record sales) To record cost of goods sold)

Problem 18-4 Flounder Appliance Co. manufactures low-price, nofrills appliances that are in great demand for rental units. Pricing and cost information on Flounder’s main products are as follows. Standalone Selling Price (Cost) Item Refrigerator Range Stackable washer/dryer unit $500($260) (270) (400) 550 700 Customers can contract to purchase either individually at the stated prices or a three-item bundle with a price of $1,790. The bundle price includes delivery and installation. Flounder also provides installation (not a separate performance obligation) Respond to the requirements related to the following independent revenue arrangements for Flounder Appliance Co On June 1, 2017, Flounder sold 90 washer/dryer units without installation to Laplante Rentals for $63,000. Laplante is a newer customer and is unsure how this product will work in its older rental units. Flounder offers a 60-day return privilege and estimates, based on prior experience with sales on this product, 4% of the units will be returned. Prepare the journal entries for the sale and related cost of goods sold on June 1, 2017. (Credit account titles are automatically indented when the 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.) Account Titles and Explanation Debit Credit To record sales) To record cost of goods sold)

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Solution 1:

a. June 1, 2017

Accounts Receivable……………………………………………. 63,000

Refund Liability (4% X $70,000)……………………………..                  2,520

Sales Revenue………………………………………………………. 60,480

Cost of Goods Sold…………………………………..               34,560

Estimated Inventory Returns
(4% X $40,000)………………………………………..                 1,440

Inventory ($400 X 90)……………………….. 36,000

b. 1. May 1, 2017

Cash (20% X [320 X $1,790]) …………………………. 114,560

Unearned Sales Revenue……………………………………        114,560

2.                                                 August 1, 2017

 

Unearned Sales Revenue……………………. ……….. 114,560

Cash……………………………………………………………..458,240

Sales Revenue ($1,790 X 320)…………………………….        572,800

Cost of Goods Sold……………………………..            297,600

Inventory (320 X [$260 + $270 + $400])                           297,600

c.

May 1, 2017

Cash (20% X $572,800)……………………………………….. 114,560

Unearned Sales Revenue………………………………………             114,560

July 1, 2017

 

Unearned Sales Revenue…………………………………… 114,560

Cash ($630,080 – $114,560) ……………………………….. 515,520

Sales Revenue………………………………………………………. 630,080

$1,790 x 320 x 1.10 = $630,080

Cost of Goods Sold…………………………………..            297,600

Inventory (320 X [$400 + $270 + $260]).                                   297,600

d.

February 1, 2017

Cash (10% X 400 X $1,790)…………………………………… 71,600

Unearned Sales Revenue………………………………………               71,600

April 1, 2017

 

Unearned Sales Revenue…………………………………….. 71,600

Accounts Receivable ($716,000 – $71,600)………… 644,400

Sales Revenue……………………………………………………….             716,000

Cost of Goods Sold………………………………….. 297,600

Inventory (400 X $930)……………………….. 297,600

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