Problem 18-05 (Part Level Submission)

Vaughn Ranch & Farm is a distributor of ranch and farm equipment. Its products range from small tools, power equipment for trench-digging and fencing, grain dryers, and barn winches. Most products are sold direct via its company catalog and Internet site. However, given some of its specialty products, select farm implement stores carry Vaughns products. Pricing and cost information on three of Vaughns most popular products are as follows.

Item		Standalone Selling Price (Cost)
Mini-trencher		$ 3,200	($1,900	)
Power fence hole auger		1,100	(700	)
Grain/hay dryer		14,500	(11,200	)

Respond to the requirements related to the following independent revenue arrangements for Vaughn Ranch & Farm.

(a)

	Your answer is correct.

On January 1, 2020, Vaughn sells 50 augers to Mills Farm & Fleet for $55,000. Mills signs a 6-month note at an annual interest rate of 12%. Vaughn allows Mills to return any auger that it cannot use within 50 days and receive a full refund. Based on prior experience, Vaughn estimates that 5% of units sold to customers like Mills will be returned (using the most likely outcome approach). Vaughns costs to recover the products will be immaterial, and the returned augers are expected to be resold at a profit. Prepare the journal entry for Vaughn on January 1, 2020. (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 enter 0 for the amounts.)

(b)

	Your answer is correct.

On August 10, 2020, Vaughn sells 15 mini-trenchers to a farm co-op in western Minnesota on account. Vaughn provides a 4% volume discount on the mini-trenchers if the co-op has a 15% increase in purchases from Vaughn compared to the prior year. Given the slowdown in the farm economy, sales to the co-op have been flat, and it is highly uncertain that the benchmark will be met. Prepare the journal entry for Vaughn on August 10, 2020. (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 enter 0 for the amounts.)

(c)

	Your answer is partially correct. Try again.

Vaughn sells three grain/hay dryers to a local farmer at a total contract price of $46,800. In addition to the dryers, Vaughn provides installation, which has a standalone selling price of $1,000 per unit installed. The contract payment also includes a $1,200 maintenance plan for the dryers for 3 years after installation. Vaughn signs the contract on June 20, 2020, and receives a 20% down payment from the farmer. The dryers are delivered and installed on October 1, 2020, and full payment is made to Vaughn. Prepare the journal entries for Vaughn in 2020 related to this arrangement. (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 enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)

Need Help with section (c). Thank you

Debit Credit Account Titles and Explanation Notes Receivable 55000 55000 Sales Revenue (To record sales) Cost of Goods Sold 35000 35000 Inventory (To record cost of goods sold) Account Titles and Explanation Debit Credit Accounts Receivable 48000 48000 Sales Revenue (To record sales) Cost of Goods Sold 28500 28500 Inventory (To record cost of goods sold) Date Account Titles and Explanation Debit Credit Jun. 20, 2020 Cash 9360 Accounts Receivable 37440 x Unearned Service Reve 3000 Unearned Service Reve 1200 Unearned Sales Revenu 43500 Oct. 1, 2020 Cash 37440 X 37440 Accounts Receivable (To record payment received) Unearned Service Revenue 3000 Unearned Sales Revenue 43500 X Service Revenue 3000 43500 Sales Revenue (To record sales) Cost of Goods Sold 33600 33600 Inventory (To record cost of goods sold) Dec. 31, 2020 Unearned Service Revenue 98 Service Revenue 98