Question
Delta Spirit, Inc. entered into a contract to sell equipment to Ash and Fire, LLC on October 1, 2020. Along with the equipment, Delta Spirit
Delta Spirit, Inc. entered into a contract to sell equipment to Ash and Fire, LLC on October 1, 2020. Along with the equipment, Delta Spirit will provide one-year maintenance services on an as needed basis, beginning once the equipment is installed. Delta Spirit provides similar services to other customers that purchased equipment sold by other vendors for $20,000. Delta Spirit will also provide installation services at no additional cost, a service that Delta Spirit typically charges $10,000. The equipment normally sells for $170,000 on its own. For the package deal, Ashes & Fire agrees to pay a total of $180,000. The equipment was delivered and installed on November 1, 2020. Ash and Fire paid the entire invoice in cash on the date of delivery and installation.
- How much revenue should Delta Spirit recognize relating to this contract in its 2020 Income Statement (round to the nearest dollar)? SHOW YOUR WORK.
- Prepare the Journal Entry for Delta Spirit to record the sale. Assume the equipment cost Delta Spirit $100,000 to manufacture
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Date Account Debit Credit
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