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13 September, 01:32

Shaw Company sells goods that cost $300,000 to Ricard Company for $410,000 on January 2, 2017. The sales price includes an installation fee, which has a standalone selling price of $40,000. The standalone selling price of the goods is $370,000. 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.

b. Shaw 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 Shaw recognize related to its sale to Ricard?

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  1. 13 September, 03:20
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    The revenue from sales to be recognized by Shaw is $390,000

    Explanation:

    A) Journal entry to record the sale on January 2, 2017

    Date Particulars Debit Credit

    January 2, 2014 Accounts Receivable $410,000

    Sales Revenue $370,000

    Unearned Service Rev $40,000

    Being the recording of sales and unearned service revenue

    Cost of Goods Sold $300,000

    Inventory of Merchandise $300,000

    B) Shaw should recognise the following Revenue from Sales to Ricard

    Sales Revenue $370,000

    Service Revenue (3/6 x $40,000) $20,000

    Due to the fact that accounts end March 31st, $390,000

    2017, only 3 months will be accounted for under

    service revenue for the year

    Therefor the revenue from sales to be recognized by Shaw is $390,000
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