FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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The Crane Appliance Store is an experienced home appliance dealer. Crane also offers a number of services together with the home appliances that it sells. Assume that Crane sells dishwashers on a standalone basis. Crane also sells installation services and maintenance services for dishwashers. However, Crane does not offer installation or maintenance services to customers who buy dishwashers from other vendors. Pricing for dishwashers is as follows.
In each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at $266. Additionally, the incremental amount charged by Crane for installation approximates the amount charged by independent third parties. Dishwashers are sold subject to a general right of return. If a customer purchases a dishwasher with installation and/or maintenance services, in the event Crane does not complete the service satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds $1,153.
| Dishwasher only | $1,264 | ||
| Dishwasher with Installation service | 1,397 | ||
| Dishwasher with maintenance services | 1,530 | ||
| Dishwasher with installation and maintenance services | 1,600 |
In each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at $266. Additionally, the incremental amount charged by Crane for installation approximates the amount charged by independent third parties. Dishwashers are sold subject to a general right of return. If a customer purchases a dishwasher with installation and/or maintenance services, in the event Crane does not complete the service satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds $1,153.
Assume that a customer purchases a dishwasher with both installation and maintenance services for $1,600. Based on its experience, Crane believes that it is probable that the installation of the equipment will be performed satisfactorily to the customer. Assume that the maintenance services are priced separately. Indicate the amount of revenue that should be allocated to the dishwasher the installation, and to the maintenance contract.
| Dishwasher | $ | |
| Installation | ||
| Maintenance | ||
| Total | $ |
Prepare the necessary journal entry for the Crane. (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.)
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Account Titles and Explanation
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Debit
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Credit
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