ABC Ranch & Farm is a distributor of ranch and farm equipment. Its products range from small

tools, power equipment for trench-digging and fencing, grain dryers, and barn winches. Most

products are sold direct via its company catalogue and internet site. However, given some of its

speciality products, select farm implement stores carry ABC's products. Pricing and cost

information on three of ABC's most popular products are as follows

Item Standalone selling Price (Cost)

Mini - trencher $3,600 ($2,000)

Power fence hole auger 1,200 ($800)

Grain/hay dryer 14,000 ($11,000)

Respond to the requirements related to the following independent revenue arrangements for ABC

Ranch and Farm

a. On January 1,2019 ABC sells 40 augers to Mills Farm & Fleet for $48,000. Mills signs a

6-month note at an annual interest rate of 12%. ABC allows Mills to return any auger that

it cannot use within 60 days and receive a full refund. Based on prior experience, ABC

estimates that 5% of units sold to customers like Mills will be returned (using the most

likely outcome approach). ABC's costs to recover the products will be immaterial and the

returned augers are expected to be resold at a profit

Required: Prepare the journal entry for ABC on January 1,2019.

b. On August 10,2019 ABC sells 16 mini trenchers to a farm co-op in western Minnesota.

ABC provides a 4% volume discount on the mini trenchers if the co-op has a 15% increase

in purchases from ABC compared to the prior year. Given the slowdown in the farm

economy, sales to the co-op have been flat, and it is highly uncertain that the benchmark

will be met.

Required: Prepare the journal entry for ABC on August 10,2019.

c. ABC sells three grain/hay dryers to a local farmer at a total contract price of $45,200. In

addition to the dryers ABC provides installation which has a standalone selling price of

$1,000 per unit installed. The contract payment also includes a $1,200 maintenance plan

for the dryers for 3 years after installation. ABC signs the contract on June 20, 2019 and

receives a 20% down payment from the farmer. The dryers are delivered and installed on

October 1 2019 and full payment is made to ABC.

Required: Prepare the journal entries for ABC in 2019 related to this arrangement.

Please solve the question with all the sub-division in a detailed manner.