Exercise 18-11

Stellar Windows manufactures and sells custom storm windows for three-season porches. Stellar also provides installation service for the windows. The installation process does not involve changes in the windows, so this service can be performed by other vendors. Stellar enters into the following contract on July 1, 2017, with a local homeowner. The customer purchases windows for a price of $2,300 and chooses Stellar to do the installation. Stellar charges the same price for the windows irrespective of whether it does the installation or not. The installation service is estimated to have a standalone selling price of $590. The customer pays Stellar $2,080 (which equals the standalone selling price of the windows, which have a cost of $1,160) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2017, Stellar completes installation on October 15, 2017, and the customer pays the balance due.

Stellar estimates the standalone selling price of the installation based on an estimated cost of $440 plus a margin of 20% on cost. Prepare the journal entries for Stellar in 2017.

Given uncertainty of finding skilled labor, Stellar is unable to develop a reliable estimate for the standalone selling price of the installation. Prepare the journal entries for Stellar in 2017