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Buffalo Ranch & Farm is a distributor of ranch and farm equipment. Its products include small tools, power equipment for trench- digging and fencing, grain dryers, and barn winches. Most products are sold direct via its company Internet site. However, given some of its specialty products, select farm implement stores carry Buffalo's products. Pricing and cost information on three of Buffalo's most popular products are as follows. Item Mini-trencher Power fence hole auger Grain/hay dryer Stand-Alone Selling Price (Cost) $4,300 ($2.440) 1,464 ($976) 16,380 ($13.420) Respond to the requirements related to the following independent revenue arrangements for Buffalo Ranch & Farm. IFRS is a constraint. On January 1, 2020, Buffalo sells augers to Mills Farm & Fleet for $58,560. Mills signs a six-month note at an annual interest rate of 12%. Buffalo allows Mills to return any auger that it cannot use within 60 days and receive a full refund. Based on prior experience, Buffalo estimates that 5% of units sold to customers like Mills will be returned (using the most likely outcome approach). Buffalo's costs to recover the products will be immaterial, and the returned augers are expected to be resold at a profit. Prepare the journal entries for Buffalo on January 1, 2020. (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 for the amounts.) Debit Credit Date January 1, 2020 Account Titles and Explanation Notes Receivable 58,560 Refund Liability 2928 55632 Sales Revenue (To record sale on account) Cost of Goods Sold January 1 2020 37088 Estimated Inventory Returns 1952 39040 Inventory (To record cost of goods sold) e Textbook and Media Question Part Score --/3 On August 10, 2020, Buffalo sells 18 mini-trenchers to a farm co-op in western Canada. Buffalo provides a 4% volume discount on the mini-trenchers if the co-op has a 15% increase in purchases from Buffalo compared with 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. Prepare the journal entries for Buffalo on August 10, 2020. (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 for the amounts.) Account Titles and Explanation Debit Credit Date August 10. 2020 Cash 77400 77400 Sales Revenue (To record cash sale) August 10, 2020 Cost of Goods Sold 43920 Inventory 43920 (To record cost of goods sold) e Textbook and Media Question Part Score --/2 Buffalo sells three grain/hay dryers to a local farmer at a total contract price of $53,000. In addition to the dryers, Buffalo provides installation, which has a stand-alone sales value of $1,260 per unit installed. The contract payment also includes a $1,080 maintenance plan for the dryers for three years after installation. Buffalo signs the contract on June 20, 2020, and receives a 20% down payment from the farmer. The dryers are delivered and installed on October 1, 2020, and full payment is made to Buffalo Prepare the journal entries for Buffalo in 2020 related to this arrangement as well as any adjusting journal entries at its December year end. (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 for the amounts. Record journal entries in the order presented in the problem. Round answers to decimal places, eg. 5,275.) Date Account Titles and Explanation Debit June 20.2020 October 1.2020 1 Service Revenue Sales Revenue (To record sales and installation revenue) October 1.2020 Cost of Goods Sold Inventory (To record cost of goods sold) Unearned Revenue December 31, 2020 Service Revenue e Textbook and Media Question Part Score --/5 On April 25, 2020, Buffalo ships 90 augers to Farm Depot, a farm supply dealer in Alberta, on consignment. By June 30, 2020, Farm Depot has sold 50 of the consigned augers at the listed price of $1,464 per unit. Farm Depot notifies Buffalo of the sales, retains a 10% commission, and remits the cash due to Buffalo. Prepare the journal entries for Buffalo and Farm Depot for the consignment arrangement. (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 for the amounts. Record journal entries in the order presented in the problem.) Date Debit Cre Account Titles and Explanation Entries for Buffalo - the Consignor April 25, 2020 (To record revenue from consignment sales) (To record cost of gods sold) Entries for Farm Depot - the Consignee (To record revenue from consignment sales) (To record payment on account) eTextbook and Media
