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(Multiple-Deliverable Arrangement)
On December 31, 2014, Gard Company sells production equipment to Wells Inc. for $75,000. Gard includes a 1-year warranty service with the sale of all its equipment. The customer receives and pays for the equipment on December 31, 2014. Gard estimates the prices to be $74,000 for the equipment and $1,000 for the warranty.
Instructions
(a) Prepare the journal entry to record this transaction on December 31, 2014.
(b) Indicate how much (if any) revenue should be recognized on January 31, 2015, and for the year 2015.
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