Chapter 6, Problem 6.12BE

Geraths Windows manufactures and sells custom storm windows for three-season porches. Geraths 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. Geraths enters into the following contract on July 1, 2022, with a local homeowner. The customer purchases windows for a price of $2,400 and chooses Geraths to do the installation. Geraths charges the same price for the windows whether it does the installation, or not.  The customer pays Geraths $2,000 (which equals the standalone selling price of the windows, at a cost of $1,100) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2022, Geraths completes installation on October 15, 2022, and the customer pays the balance due. Assuming that (a) Geraths estimates the standalone selling price of the installation based on an estimated cost of $400 plus a margin of…

Geraths Windows manufactures and sells custom storm windows for three-season porches. Geraths 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. Geraths enters into the following contract on July 1, 2022, with a local homeowner. The customer purchases windows for a price of $2,400 and chooses Geraths to do the installation. Geraths charges the same price for the windows whether it does the installation, or not.  The customer pays Geraths $2,000 (which equals the standalone selling price of the windows, at a cost of $1,100) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2022, Geraths completes installation on October 15, 2022, and the customer pays the balance due. The installation service is estimated to have a standalone selling price using the following methods.  (a) Geraths estimates the standalone…

Pharoah Windows manufactures and sells custom storm windows for three-season porches. Pharoah 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. Pharoah enters into the following contract on July 1, 2020, with a local homeowner. The customer purchases windows for a price of $2,290 and chooses Pharoah to do the installation. Pharoah charges the same price for the windows irrespective of whether it does the installation or not. The customer pays Pharoah $1,990 (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, Pharoah completes installation on October 15, 2020, and the customer pays the balance due.     Pharoah estimates the standalone selling price of the installation based on an estimated cost of $440…

Circuit Fitness (CF) sells customized exercise equipment to fitness centers.  On September 1st, 2021, the sales manager for CF obtained a signed contract from Suburban Fitness Center (SFC) for all of the equipment for their new fitness center. The new fitness center is currently in the design stage and has a projected opening date of November 1, 2022.  CF will deliver the equipment on October 1, 2022.    The contract specifies that the SFC will pay $1,400,000 within 7 days of the contract being signed by both parties.  SFC made the payment on September 5, 2021.    The amount of interest on similar projects for this time period equates to $120,000.  CF has significant experience in these types of transactions and a significant revenue reversal is not expected to occur.    Will the interest be incorporated into the transaction price (yes/no) If the interest is incorporated into the price will interest expense be recognized or interest income? What is the transaction price?

Vishal

Pina Windows manufactures and sells custom storm windows for three-season porches. Pina 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. Pina enters into the following contract on July 1, 2020, with a local homeowner. The customer purchases windows for a price of $2,370 and chooses Pina to do the installation. Pina 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 $610. The customer pays Pina $2,050 (which equals the standalone selling price of the windows, which have a cost of $1,140) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2020, Pina completes installation on October 15, 2020, and the customer pays the balance due. Prepare the journal entries for Pina in 2020.

Green Doors manufactures and sells custom folding doors for enclosed porches. Green also providesinstallation service for the doors. The installation process does not involve changes in the doors, so thisservice can be provided by other vendors.Green enters into the following contract on May 1, 2023, with a local homeowner. The customer purchases adoor for a price of $7,500 and chooses Green to do the installation. The price of the installation service is$1,000. The customer agrees to pay Green $5,000 upon delivery of the door and the remaining balance uponinstallation of the doors. The door is delivered on July 1, 2023. Green completes installation on August 15,2023, and the customer pays the balance due.d) Prepare the journal entries for July 1 and August 15

Crane Windows manufactures and sells custom storm windows for three-season porches. Crane 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. Crane enters into the following contract on July 1, 2025, with a local homeowner. The customer purchases windows for a price of $2,670 and chooses Crane to do the installation. Crane charges the same price for the windows irrespective of whether it does the installation or not. The customer pays Crane $2,016 (which equals the standalone selling price of the windows, which have a cost of $1,250) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2025, Crane completes installation on October 15, 2025, and the customer pays the balance due. (a) Your answer is partially correct. Crane estimates the standalone selling price of the installation based on an estimated cost of…

Circuit Fitness (CF) sells customized exercise equipment to fitness centers.  On February 2nd, 2022, the sales manager for CF obtained a signed contract from Suburban Fitness Center (SFC) for all of the equipment for their new fitness center. The new fitness center is currently in the design stage and has a projected opening date of March 15, 2022. The contract requires CF to deliver the equipment on March 1, 2022.  The contract specifies that the SFC will pay $300,000 for the equipment on March 31, 2023.  The amount of interest on similar projects for this time period equates to $27,000.  CF has significant experience in these types of transactions and a significant revenue reversal is not expected to occur.    Will the interest be incorporated into the transaction price (yes/no) If the interest is incorporated into the price will the company recognize interest expense or interest income? c. What is the transaction price?