Problem 18-05 (Part Level Submission) Pronghorn 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 Pronghorn's products. Pricing and cost information on three of Pronghorn's most popular products are as follows. Item Mini-trencher Power fence hole auger Grain/hay dryer Standalone Selling Price (Cost) $ 3,800 ($2,200 ) 1,000 (800) 14,800 (10,100 ) Respond to the requirements related to the following independent revenue arrangements for Pronghorn Ranch & Farm. (a) Your answer is correct. On January 1, 2020, Pronghorn sells 40 augers to Mills Farm & Fleet for $40,000. Mills signs a 6-month note at an annual interest rate of 12%. Pronghorn allows Mills to return any auger that it cannot use within 50 days and receive a full refund. Based on prior experience, Pronghorn estimates that 5% of units sold to customers like Mills will be returned (using the most likely outcome approach). Pronghorn'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 Pronghorn 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 Notes Receivable 40000 Sales Revenue 40000 (To record sales) Cost of Goods Sold 32000 32000 Inventory (To record cost of goods sold) (b) On August 10, 2020, Pronghorn sells 16 mini-trenchers to a farm co-op in western Minnesota on account. Pronghorn provides a 4% volume discount on the mini-trenchers if the co-op has a 15% increase in purchases from Pronghorn 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 Pronghorn 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 (To record sales) (To record cost of goods sold) Accounts Receivable Accounts Payable Advertising Expense Allowance for Sales Returns and Allowances Billings on Construction in Process Cash Cash, Parts, Labor Commission Expense Commission Revenue Construction in Process Construction Expenses Contract Asset Contract Liability Cost of Goods Sold Cost of Installment Sales Deferred Gross Profit Delivery Expense Discount on Notes Receivable Estimated Inventory Returns Finished Goods Inventory Franchise Revenue Freight- Out Gain on Repossession Income Summary Installment Accounts Receivable Installment Sales Revenue Interest Expense Interest Revenue Inventory Inventory on Consignment Liability to Bonus Point Customers Liability to Enyart Company Liability to Werner Metal Company License Revenue Loss from Long-Term Contracts Loss on Repossession Materials, Cash, Payables No Entry Notes Receivable Operating Expenses Payable to Consignor Purchases Realized Gross Profit Repossessed Merchandise Retained Earnings Returned Inventory Revenue from Consignment Sales Revenue from Franchise Fees Revenue from Long-Term Contracts Sales Discounts Sales Discounts Forfeited Sales Returns and Allowances Sales Revenue Service Revenue Unearned Franchise Revenue Unearned Sales Revenue Unearned Service Revenue - Installation Unearned Service Revenue - Maintenance Unearned Warranty Revenue Warranty Expense Warranty Liability