Question

(Allocate Transaction Price) 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, 2017, with a local homeowner. The customer purchases windows for a price of \(2,400 and chooses Geraths to do the installation. Geraths charges the same price for the windows irrespective of whether it does the installation or not. The installation service is estimated to have a standalone selling price of \)600. The customer pays Geraths \(2,000 (which equals the standalone selling price of the windows, which have a cost of \)1,100) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2017, Geraths completes installation on October 15, 2017, and the customer pays the balance due. Prepare the journal entries for Geraths in 2017. (Round amounts to nearest dollar.)

Short answer

The total revenue earned by Geraths is $2,400.

Step-by-step solution

Meaning of Standalone Selling Price

Standalone selling price is the price at which a company will sell a product or serviceto a single consumer. This requires setting an adequate selling price for a product or service with some percentage of the profit.

Journal entries for Geraths in 2017

Date	Particular	Debit ($)	Credit ($)
July 1, 2017	No entry
September 1, 2017	Cash a/c	2,000
	Accounts receivables a/c	400
	To Unearned service revenue a/c		554
	To Sales revenue a/c		1,846
September 1, 2017	Cost of goods sold a/c	1,100
	To Inventory a/c		1,100
October 15, 2017	Cash a/c	400
	To Accounts receivables a/c		400
October 15, 2017	Unearned service revenue a/c	554
	To Service revenue a/c		554