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Prepare the journal entry to record this transaction

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Reference no: EM133070200

Question - Sheffield Windows manufactures and sells custom storm windows for three-season porches. Sheffield 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. Sheffield enters into the following contract on July 1, 2020, with a local homeowner. The customer purchases windows for a price of $2,280 and chooses Sheffield to do the installation. Sheffield charges the same price for the windows irrespective of whether it does the installation or not. The installation service is estimated to have a standalone selling price of $600. The customer pays Sheffield $1,980 (which equals the standalone selling price of the windows, which have a cost of $1,150) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2020, Sheffield completes installation on October 15, 2020, and the customer pays the balance due.

Required -

Prepare the journal entries for Sheffield in 2020.

Prepare the journal entry to record this transaction on January 2, 2020, and on December 31, 2020 (assuming financial statements are prepared on December 31, 2020).

Repeat the requirements for (a), assuming that in addition to the assurance warranty, Pharoah sold an extended warranty (service-type warranty) for an additional 2 years (2022-2023) for $820.

Reference no: EM133070200

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