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27 April, 02:56

Eugene Co. has inventory it purchased for $6,000. It sells the inventory to a customer for $10,000, including installation. Installation sold separately costs $1,000 and the inventory sold separately costs $10,000. What amount of Sales Revenue is recognized by Eugene when delivery of the inventory has been made to the customer, but the installation has not been completed?

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  1. 27 April, 02:59
    0
    The necessary entries would be:

    Dr Accounts receivable $11,000

    Cr Sales revenue $10,000

    Cr Deferred revenue $,1000

    Explanation:

    Revenue should be recognized in the books of account where the selling party has performed its obligation of delivering goods or rendering services as contained in the sales contract.

    This contract contains provision of goods - inventory that have been delivered and rendering of services-installation that is in progress, as a result the revenue relating to the former is due to be recognized now while the later would be recognized when is installation is concluded.
  2. 27 April, 03:21
    0
    Answer: $9090.91

    Explanation:

    Guven the following;

    Sales price of Inventory = $10,000

    Installation cost = $1000

    Inventory and installation = $10,000

    Calculate : Amount of sales revenue recognized by Eugene when delivery of inventory has been made to customer but installation hasn't been completed.

    That is, what is the sales price of the inventory alone at that price without adding the installation fee.

    Total cost price if inventory and installation were charged separately

    Price = $ (10,000 + 1,000) = $11,000

    Sale revenue = (price when sold together) : (price when sold separately) * sales price of inventory

    Sales revenue = ($10,000 : $11,000) * $10,000 = 0.909090 * $10,000 = 9090.91
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Home » Business » Eugene Co. has inventory it purchased for $6,000. It sells the inventory to a customer for $10,000, including installation. Installation sold separately costs $1,000 and the inventory sold separately costs $10,000.
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