Question

Stone Pest Control offers extermination services to customers in various arrangements and packages. For example, a customer could call Stone as needed to come out and spray for insects; for this service, Stone charges $80 per service call. For a separate termite inspection, Stone charges a selling price of $100.
Alternatively, the customer can sign an annual $300 contract with Stone for quarterly service visits plus one termite inspection. The annual contract also permits the customer to request spraying services at any time between quarterly visits, at no extra charge. Stone estimates that the average contract customer requests one service call per year, outside of the scheduled quarterly visits. For each of the following transactions, provide the journal entries that Stone would make to recognize revenues. Ignore the journal entries involving expenses.
a. January 2, 2013, a customer calls Stone to come out and spray for insects. The customer has no contract with Stone. Stone performs the service on January 4, 2013, and the customer pays in cash.
b. January 2, 2013, a customer calls Stone to come out and spray for insects and inspect for termites. The customer has no contract with Stone. Stone performs the services on January 4, 2013, and the customer pays in cash.
c. January 2, 2013, a customer calls Stone to come out and spray for insects and inspect for termites. The customer signs a contract with Stone on January 4, 2013, the same date that Stone provides the first quarterly service and inspects for termites. The customer pays the entire contract price in cash on January 4.
d. How should Stone account for the spraying services that occur between scheduled quarterly services?
e. April 30, 2013, the customer in part c calls and asks Stone to come out and spray for ants.



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  • CreatedMarch 04, 2014
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