Nadals Tennis Company sells custom tennis court designs and construction, as well as tennis equipment and accessories.

Required:

For each of Nadals following revenue arrangements, prepare the necessary journal entries and determine the type and amount of revenue reported during the first year.

Case 1:

Nadals offers a contract that includes a tennis court design plus construction for a total price

of $7500. On a stand-alone basis, the court design sells for $1,302 and the fair value of the

construction is estimated to be $7,998. Customers may buy just the court design and hire another

company to do the construction. Nadals sold 10 of these contracts. Customers pay 60% when court

designs are completed with the balance due once construction is complete. Assume all contracts were

sold on April 1st, all designs were completed on April 23rd, and all construction completed on May 15th