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Reynolds Appliance sells refrigerators on a standalone basis. Reynolds also sells installation services and maintenance services for the refrigerators. When maintenance services are provided, the
Reynolds Appliance sells refrigerators on a standalone basis. Reynolds also sells installation services and maintenance services |
for the refrigerators. When maintenance services are provided, the maintenance service is separately priced within the arrangement |
at $500, which approximates the amount charged by independent third parties. |
On May 15, 2021, a customer purchased a refrigerator, including maintenance and installation, for $4,800. The refrigerator purchased |
alone would have cost the customer $4,200. If the installation had been done by an outside party, they would have charged $450. |
The customer pays cash on May 15, but asks to have the refrigerator delivered on on July 1. At that time, it is successfully installed. |
The maintenance contract covers two years from the installation date. |
What journal entries will Reynolds make in May, June and July 2021 regarding this transaction? |
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