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Stellar Company sells goods that cost $309,500 to Record Company for $415,500 on January 2, 2020. The sales price includes an installation fee, which has a standalone selling price of $45,500. The standalone selling price of the goods is $370,000. The installation is considered a separate performance obligation and is expected to take 6 months to complete. (a) Prepare the journal entries (if any) to record the sale on January 2, 2020. (Credit account titles are automatically indented when 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.)

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Answer:

See explanation section

Explanation:

The journal entry to record the sale of goods is as follows:

January 2, 2020 Accounts receivable-Record Company   Debit  $415,500

                            Sales Revenue                      Credit          $370,000

                            Unearned service revenue  Credit           $45,500

As the selling price is $415,500, Stellar will receive $415,500 from Record company. However, the sales revenue is the selling price of the goods, which is $370,000. $45,500 is an installation fee for which Steller will give service for the next 6 months. Therefore, it is an unearned revenue assuming that the receivable will pay the money within a few months or earlier or before the service has been performed.

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