4 5 P18-4 (Allocate Transaction Price, Discounts, Time Value) Economy Appliance Co. manufactures low-price, 6 no-frills appliances that are in great demand for rental units. Pricing and cost information on Economy's main products are as follows Standalone Selling Price (Cost) tem Refrigerator $500 ($260) $560 ($275) Range Stackable washer/dryer unit $700 ($400) Customers can contract to purchase either individually at the stated prices or a three-item bundle with a price of $1,800. The bundle price includes delivery and installation. Economy provides delivery and instal lation as a standalone service for any of its products for a price of $100 Instructions Respond to the requirements related to the following independent revenue arrangements for Economy Appliance Co (a) On June 1, 2014, Economy sold 100 washer/dryer units without installation to Laplante Rentals or $70,000. Laplante is a newer customer and is unsure how this product will work in its older rental units. Economy offers a 60-day return privilege and estimates, based on prior experience with sales on this product, 4% of the units will be returned. Prepare the journal entries for the sale and related cost of goods sold on June 1, 2014 (b) Yellow Card Property Managers operates upscale student apartment buildings. On May 1, 2014 Economy signs a contract with YellowCard for 300 appliance bundles to be delivered and in talled in one of its new buildings. YellowCard pays 20% cash at contract signing and will pay the balance upon delivery and installation no later than August 1, 2014. Prepare journal entri for Economy on (1) May 1, 2014, and (2) August 1, 2014, when all appliances are delivered and installed Refer to the arrangement in part (b). It would help YellowCard secure lease agreements with stu dents if the delivery and installation of the appliance bundles can be completed by July 1, 2014 Yellow Card offers a 10% bonus payment if Economy can complete delivery and installation by July 1, 2014. Economy estimates its chances of meeting the bonus deadline to be 60%, based on a number of prior contracts of similar scale. Repeat the requirement for par (b), given this bonus provision. Assume installation is completed by July 1, 2014 name: ALAN StylesBook: Intermediate Accounting, 15th Edition, 2014 FASB Update. No part of any book may b duced or transmitted in any form by any means without the publisher's prior written permission. Use (other than pursuant ualified fair use privilege) in violation of the law or these Terms of Service is prohibited. Violators will be prosecuted to the fu nt of the 1104 Chapter 18 Revenue Recognition 1 (d) Epic Rentals would like to take advantage of the bundle price for its 400-unit project; on February 2014, Economy signs a contract with Epic for delivery and installation of 400 bundles. Under the agreement, Economy will hold the appliance bundles in its warehouses until the new renta units are ready for installation. Epic pays 10% cash at contract signing. On April 1, 2014, Economy completes manufacture of the appliances in the Epic bundle order and places them in the ware- house. Economy and Epic have documented the warehouse arrangement and identified the units designated for Epic. The units are ready to ship, and Economy may not sell these units to other