Bonita 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 catalog and Internet site. However, given some of its specialty products, select farm implement stores carry Bonita's products. Pricing and cost information on three of Bonita's most popular products are as follows.

Item Standalone

Selling Price (Cost)

Mini-trencher $ 3,400

($2,200 )

Power fence hole auger 1,300

(800 )

Grain/hay dryer 14,000

(11,300 )

Respond to the requirements related to the following independent revenue arrangements for Bonita Ranch & Farm.

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(a)

Correct answer. Your answer is correct.

On January 1, 2020, Bonita sells 30 augers to Mills Farm & Fleet for $39,000. Mills signs a 6-month note at an annual interest rate of 12%. Bonita allows Mills to return any auger that it cannot use within 50 days and receive a full refund. Based on prior experience, Bonita estimates that 5% of units sold to customers like Mills will be returned (using the most likely outcome approach). Bonita's costs to recover the products will be immaterial, and the returned augers are expected to be resold at a profit. Prepare the journal entry for Bonita 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 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

Entry field with correct answer

Notes Receivable

Entry field with correct answer

39,000

Entry field with correct answer

Entry field with correct answer

Sales Revenue

Entry field with correct answer

Entry field with correct answer

39,000

(To record sales)

Entry field with correct answer

Cost of Goods Sold

Entry field with correct answer

24,000

Entry field with correct answer

Entry field with correct answer

Inventory

Entry field with correct answer

Entry field with correct answer

24,000

(To record cost of goods sold)

SHOW LIST OF ACCOUNTS

SHOW SOLUTION

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Attempts: 4 of 5 used

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(b)

Correct answer. Your answer is correct.

On August 10, 2020, Bonita sells 15 mini-trenchers to a farm co-op in western Minnesota on account. Bonita provides a 4% volume discount on the mini-trenchers if the co-op has a 15% increase in purchases from Bonita 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. Prepare the journal entry for Bonita 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 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

Entry field with correct answer

Accounts Receivable

Entry field with correct answer

51,000

Entry field with correct answer

Entry field with correct answer

Sales Revenue

Entry field with correct answer

Entry field with correct answer

51,000

(To record sales)

Entry field with correct answer

Cost of Goods Sold

Entry field with correct answer

33,000

Entry field with correct answer

Entry field with correct answer

Inventory

Entry field with correct answer

Entry field with correct answer

33,000

(To record cost of goods sold)

SHOW LIST OF ACCOUNTS

SHOW SOLUTION

LINK TO TEXT

Attempts: 3 of 5 used

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(c)

Bonita sells three grain/hay dryers to a local farmer at a total contract price of $45,400. In addition to the dryers, Bonita provides installation, which has a standalone selling price of $1,100 per unit installed. The contract payment also includes a $1,200 maintenance plan for the dryers for 3 years after installation. Bonita 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 Bonita. Prepare the journal entries for Bonita in 2020 related to this 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 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)

Date

Account Titles and Explanation

Debit

Credit

Jun. 20, 2020

(To record payment received)

(To record sales)

(To record cost of goods sold)