80.2K

Verified Solution

Link Copied!

Sandhill Company manufactures products ranging from simple automated machinery to complex systems containing numerous components. Unit selling prices range from $200,000 to $1,500,000 and are quoted inclusive of installation. The installation process does not involve changes to the features of the equipment and does not require proprietary information about the equipment in order for the installed equipment to perform to specifications. Sandhill has the following arrangement with Sweet Acacia Inc. - Sweet Acacia purchases equipment from Sandhill for a price of $1,067,800 and contracts with Sandhill to install the equipment. Sandhill charges the same price for the equipment irrespective of whether it does the installation or not. The cost of the equipment is $559,000. - Sweet Acacia is obligated to pay Sandhill the $1,067,800 upon the delivery of the equipment. Sandhill delivers the equipment on Jone 1,2025, and completes the installation of the equipment on September 30, 2025. The equipment has a useful life of 10 years. Assume that the equipment and the installation are two distinct performance obligations which should be accounted for separately. Assuming Sandhill does not have market data with which to determine the standalone selling price of the installation services. As a result, an expected cost plus margin approach is used. The cost of installation is $44,960; Sandhill prices these services with a 25% margin relative to cost. Prepare the journal entries for Sandhill for this revenue arrangement on June 1,2025, assuming Sandhill receives payment when installation is completed. (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 eniter 0 for the amounts. List all debit entries before credit entries. Round final answers to 0 decimal ploces, e.g. 5,275.)

Answer & Explanation Solved by verified expert

See Answer