Problem 18-6 Pearl Hardware takes pride as the \"shop around the corner\" that c
ID: 2395261 • Letter: P
Question
Problem 18-6 Pearl Hardware takes pride as the "shop around the corner" that can compete with the big-box home improvement stores by providing good service from knowledgeable sales associates (many of whom are retired local handymen). Pearl has developed the following two revenue arrangements to enhance its relationships with customers and increase its bottom line 1. Pearl sells a specialty portable winch that is popular with many of the local customers for use at their lake homes (putting docks in and out, launching boats, etc.). The Pearl winch is a standard manufacture winch that Pearl modifies so the winch can be used for a variety of tasks. Pearl sold 50 of these winches during 2017 at a total price of $15,500, with a warranty guarantee that the product was free of any defects. The cost of winches sold is $16,800. The assurance warranties extend for a 3-year period with an estimated cost of $1,500. In addition, Pearl sold extended warranties related to 20 Pearl winche for 2 years beyond the 3-year period for $410 each. 2. To bolster its already strong customer base, Pearl implemented a customer loyalty program that rewards a customer with 1 loyalty point for every $10 of purchases on a select group of Pearl products. Each point is redeemable for a $1 discount on any purchases of Pearl merchandise in the following 2 years. During 2017, customers purchased select group products for $105,000 (all products are sold to provide a 45% gross profit) and earned 10,500 points redeemable for future purchases. The standalone selling price of the purchased products is $105,000. Based on prior experience with incentives programs li this, Pearl expects 10,000 points to be redeemed related to these sales (Pearl appropriately uses this experience to estimate the value of future consideration related to bonus points). Prepare the journal entries for Pearl related to the sales of Pearl winches with warranties. (Credit account titles are automatically indented when the 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. Do not round intermediate calculations. Round final answers to O decimal places.) 6/30/2018Explanation / Answer
Workings:
Workings
Dear Student,
Best effort has been made to give quality and correct answer. But if you find any issues please comment your concern. I will definitely resolve your query.
Date Account Description Debit Credit 1a Cash $ 15,500 Sales revenue $ 14,132 Unearned revenue $ 1,368 (To record Sales) 1b Cost of Goods Sold $ 16,800 Inventory $ 16,800 (To record Cost of goods sold)