BigBoy Equipment Inc sells heavyduty forkift trucks Model 21

BigBoy Equipment Inc. sells heavy-duty forkift trucks, Model 217A has a stand-alone price of $126,000. BigBoy offers to sell the 217A inclusive of a three-year service contract for $162,100 Required Prepare a journal entry to record the sale of one Model 217A forklift truck plus service contract for $162.100 assuming:(If no entry is required for a transaction/event, select \"No journal entry required\" in the first account field.) 1. A comparable service contract is sold separately for $54,000. BigBoy uses the relative stand-alone value method for multiple deliverables. 2. The service contract has a vanable stand-alone value ranging from $31.500 to $54,000 and BigBoy uses the residual value method View transaction list Journal entry worksheet Record the sale of Model 217A assuming comparable service contract is sold separately and using relative fair value method. Note: Enter debits before credits General Journal Debit Credit

Solution

Transaction Account title Debit Credit 1 Cash 162100 Sales revenue 113470 Unearned service revenue 48630 Stand alone price for the fork lift truck 126000 Standa alone price for service contract 54000 Total of the standalone prices 180000 Price for which the asset is sold 162100 Price to be accounted for equipment (162,100/180,000) x 126,000 113470 Price to be accounted for service contract (162,100/180,000) x 126,000 48630 The service revenue will be accounted @$16,210 each year end for three years. Transaction Account title Debit Credit 2 Cash 162100 Sales revenue 126000 Unearned service revenue 36100 Price for which the asset is sold 162100 Stand alone price for the fork lift truck 126000 Balance available for service contract 36100 The service revenue will be accounted @$12,033 each year end for three years.