Answer:
Credit to Unearned Service Revenue of $24,000
Explanation:
Given that,
Fair values:
Equipment = $90,000
Installation = $60,000
Training = $30,000
Total fair value = $90,000 + $60,000 + $30,000
= $180,000
Total cost of purchasing equipment, installation and training = $144,000
The cost to be allocated proportionately is as follows:
The transaction price allocated to the Equipment:
= Fair value of equipment × (Total cost ÷ Total fair value)
= $90,000 × ($144,000 ÷ $180,000)
= $90,000 × 0.8
= $72,000
The transaction price allocated to the Installation:
= Fair value of installation × (Total cost ÷ Total fair value)
= $60,000 × ($144,000 ÷ $180,000)
= $60,000 × 0.8
= $48,000
The transaction price allocated to the Training:
= Fair value of training × (Total cost ÷ Total fair value)
= $30,000 × ($144,000 ÷ $180,000)
= $30,000 × 0.8
= $24,000
Therefore, the journal entry to record the transaction on March 15, 2021 will include a credit to Unearned Service Revenue of $24,000 (for training).
Note: As the product is purchased and installed on the same day of purchase but the training would be provided in the future. Hence, it is treated as the unearned service revenue.
