Reference no: EM133106747

Questions -

Q1) On June 3, 2020, Vaughn Company sold to Ann Mount merchandise having a sales price of $8,200 (cost $4,920) with terms of n/60, f.o.b. shipping point. Vaughn estimates that merchandise with a sales value of $820 will be returned. An invoice totaling $110 was received by Mount on June 8 from Olympic Transport Service for the freight cost. Upon receipt of the goods, on June 8, Mount returned to Vaughn $300 of merchandise containing flaws. Vaughn estimates the returned items are expected to be resold at a profit. The freight on the returned merchandise was $25, paid by Vaughn on June 8. On July 16, the company received a check for the balance due from Mount. Prepare journal entries for Vaughn Company to record all the events in June and July.

Q2) Pharoah Inc. manufactures and sells computers that include an assurance-type warranty for the first 90 days. Pharoah offers an optional extended coverage plan under which it will repair or replace any defective part for 3 years from the expiration of the assurance-type warranty. Because the optional extended coverage plan is sold separately, Pharoah determines that the 3 years of extended coverage represents a separate performance obligation. The total transaction price for the sale of a computer and the extended warranty is $3,930 on October 1, 2020, and Pharoah determines the standalone selling price of each is $3,500 and $430, respectively. Further, Pharoah estimates, based on historical experience, it will incur $180 in costs to repair defects that arise within the 90-day coverage period for the assurance-type warranty. The cost of the equipment is $1,310. Assume that the $180 in costs to repair defects in the computers occurred on October 25, 2020. Prepare the journal entry(ies) to record the October transactions related to sale of the computers.