Furniture Land Inc. is a producer and retailer of high-end custom-designed furniture and uses thecontract-based approach to revenue recognition. The company produces only to special order and requires a one-third down payment before any work begins. The customer is then required to pay one-third at the time of delivery and the balance within 30 days after delivery.
It is now February 1, 2020, and Furniture Land has just accepted $3,000 as a down payment from H. Gooding, a wealthy stockbroker. Per the contract, Furniture Land is to deliver the custom furniture to Gooding’s residence by June 15, 2020. Gooding is an excellent customer and has always abided by the contract terms in the past. If Furniture Land cannot make the delivery by June 15, the contract terms state that Gooding has the option of cancelling the sale and receiving a full reimbursement of any down payment. It is estimated that Furniture Land’s cost to design and manufacture the furniture ordered by Gooding will be $6,300.

Required

As Furniture Land’s accountant, describe when the company should be recognizing revenue. Prepare all journal entries related to the sale.