Vaughn Windows manufactures and sells custom storm windows for three-season porches. Vaughn also provides installation service for the windows. The installation process does not involve changes in the windows, so this service can be performed by other vendors. Vaughn enters into the following contract on July 1, 2020, with a local homeowner. The customer purchases windows for a price of $2,340 and chooses Vaughn to do the installation. Vaughn charges the same price for the windows irrespective of whether it does the installation or not. The installation service is estimated to have a standalone selling price of $570. The customer pays Vaughn $1,960 (which equals the standalone selling price of the windows, which have a cost of $1,100) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2020, Vaughn completes installation on October 15, 2020, and the customer pays the balance due. Vaughn estimates the standalone selling price of the installation based on an estimated cost of $410 plus a margin of 20% on cost. Given uncertainty of finding skilled labor, Vaughn is unable to develop a reliable estimate for the standalone selling price of the installation. Prepare the journal entries for Vaughn in 2020.
Vaughn Windows manufactures and sells custom storm windows for three-season porches. Vaughn also provides installation service for the windows. The installation process does not involve changes in the windows, so this service can be performed by other vendors. Vaughn enters into the following contract on July 1, 2020, with a local homeowner. The customer purchases windows for a price of $2,340 and chooses Vaughn to do the installation. Vaughn charges the same price for the windows irrespective of whether it does the installation or not. The installation service is estimated to have a standalone selling price of $570. The customer pays Vaughn $1,960 (which equals the standalone selling price of the windows, which have a cost of $1,100) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2020, Vaughn completes installation on October 15, 2020, and the customer pays the balance due.
Vaughn estimates the standalone selling price of the installation based on an estimated cost of $410 plus a margin of 20% on cost.
Given uncertainty of finding skilled labor, Vaughn is unable to develop a reliable estimate for the standalone selling price of the installation.
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