Rix Company sells home appliances and provides installation and service for its customers. On April 1, 2017, a customer purchased a dishwasher that Rix normally sells for $1,000. In addition, the customer purchased the installation service and a 3-year service contract, with stand-alone selling prices of $200 and $400, respectively. Because the customer purchased all three items as a bundle, Rix charged the customer $1,400.

Required:

1.	How should the transaction price be allocated among the products?
2.	Prepare the journal entries to recognize revenue related to each product in 2017.

CHART OF ACCOUNTS

Rix Company

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Equipment
198	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Revenue
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue: Dishwasher
412	Sales Revenue: Installation
413	Sales Revenue: Service Contract

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
910	Income Tax Expense

How should the transaction price be allocated among the products?

Dishwasher
Installation
Service contract

Prepare the journal entry to recognize revenue related to each product sold on April 1 and the end of year entry on 12/31. Additional Instruction

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GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6