Problem 18-3 Riverbed Company sells total outdoor grilling solutions, providing
ID: 2520180 • Letter: P
Question
Problem 18-3
Riverbed Company sells total outdoor grilling solutions, providing gas and charcoal grills, accessories, and installation services for custom patio grilling stations.
Respond to the requirements related to the following independent revenue arrangements for Riverbed products and services.
a.Riverbed offers contract GM205, which is comprised of a free-standing gas grill for small patio use plus installation to a customer’s gas line for a total price $820. On a standalone basis, the grill sells for $709 (cost $388), and Riverbed estimates that the standalone selling price of the installation service (based on cost-plus estimation) is $160. (The selling of the grill and the installation services should be considered two performance obligations.) Riverbed signed 10 GM205 contracts on April 20, 2017, and customers paid the contract price in cash. The grills were delivered and installed on May 15, 2017. Prepare journal entries for Riverbed for GM205 in April and May 2017. (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.)
Date:
April 20, 2017
May 15, 2017
(To Record Sales)
(To record cost of goods sold)
b.he State of Kentucky is planning major renovations in its parks during 2017 and enters into a contract with Riverbed to purchase 370 durable, easy maintenance, standard charcoal grills during 2017. The grills are priced at $210 each (with a cost of $172 each), and Riverbed provides a 5% volume discount if Kentucky purchases at least 330 grills during 2017. On April 17, 2017, Riverbed delivered and received payment for 310 grills. Based on prior experience with the State of Kentucky renovation projects, the delivery of this many grills makes it certain that Kentucky will meet the discount threshold. Prepare the journal entries for Riverbed for grills sold on April 17, 2017. Assume the company records sales transaction net. (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.)
Entry to record sales:
Entry to record cost of goods sold:
c.Riverbed sells its specialty combination gas/wood-fired grills to local restaurants. Each grill is sold for $1,060 (cost $584) on credit with terms 2/30, net/90. Prepare the journal entries for the sale of 20 grills on September 1, 2017, and upon payment, assuming the customer paid on (1) September 25, 2017, and (2) October 15, 2017. Assume the company records sales net. (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.)
Entry to record sale (1)
Entry to Record Sale 2
d.On October 1, 2017, Riverbed sold one of its super deluxe combination gas/charcoal grills to a local builder. The builder plans to install it in one of its “Parade of Homes” houses. Riverbed accepted a 3-year, zero-interest-bearing note with face amount of $5,643. The grill has an inventory cost of $2,463. An interest rate of 10% is an appropriate market rate of interest for this customer. Prepare the journal entries on October 1, 2017, and December 31, 2017. (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. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.)
Explanation / Answer
RIVERBED COMPANY General journal to record sales during the year 2017 a. To record the sale of GM205 contracts Date Account Title Debit Credit Apr.20 Cash 8200 Unearned Revenue 8200 (Payment received for 10 GM205 contracts) May.15 Unearned Revenue 8200 Sales 7560 Service Revenue 640 (Completion of the 10 GM205 contracts) Cost of goods sold 3880 Inventory 3880 (Cost of 10 gas grills sold) Standalone price of grill 709 Standalone price of installation service 160 Total price 869 Allocation price of combination price Total Price 820 Allocated to grill (709/769)*820 756 Allocated to installation 64 b. To record the sale of charcoal grills to Satet of Kentucky. Date Account Title Debit Credit Apr.17 Accounts Receivable 61845 Sales Discounts 3255 Sales 65100 (Sales of 310 charcoal grills to State of Kintucky) Cost of goods sold 53320 Inventory 53320 (Cost of the 310 grills sold ) Cash 61845 Accounts Receivable 61845 (Payment received from State of Kentucky) As the company is expecting Kentucky State to meet the discount threshold discount is accounted. c. To record the sale of gas / wood fired grills Date Account Title Debit Credit Sept.1 Accounts Receivable 21200 Sales 21200 (Sales of 20 gas/wood fired grills) Cost of goods sold 11680 Inventory 11680 (Cost of the 20 gas/wood fired grills sold ) When the payment is received on Sept.25 Sept.25 Cash 20776 Sales Discount 424 Accounts Receivable 21200 (Payment received for the sale of gas/wood fired grills) When the payment is received on Oct.15 Oct.15 Cash 21200 Accounts Receivable 21200 (Payment received for the sale of gas/wood fired grills) d. To record the sale of superd deluxe combination grill. Date Account Title Debit Credit Sept.1 Accounts Receivable 4240 Sales 4240 (Sale of super deluxe combination grill) Cost of goods sold 2463 Inventory 2463 (Cost of the super deluxe combination grill) Note receivable 5643 Premium on note receivable 1443 Accounts Receivable 4240 (Receipt of 3-year zero interest note gaianst the receivables) Non - interest bearing note received 5643 Term 3 years Rate of interest 10% Present Value of the note - 5,643 / (1.10)^3 4240 This will be the sale value of the grill.