Value Dealership Inc. markets and sells the vehicles to retail customers. Along with a new vehicle purchase, a customer will receive a free annual maintenance contract for one year from the date of purchase. The standalone selling price of a vehicle is $30,000 and the standalone selling price for the annual maintenance contract is $500. During October 2020, Value Dealership Inc. sold 72 vehicles for $30,250 per vehicle, each with a free annual maintenance contract. Note: Carry all decimals in calculations; round the final answer to the nearest dollar.
Value Dealership Inc. markets and sells the vehicles to retail customers. Along with a new vehicle purchase, a customer will receive a free annual maintenance contract for one year from the date of purchase. The standalone selling price of a vehicle is $30,000 and the standalone selling price for the annual maintenance contract is $500. During October 2020, Value Dealership Inc. sold 72 vehicles for $30,250 per vehicle, each with a free annual maintenance contract.
Note: Carry all decimals in calculations; round the final answer to the nearest dollar.
a.) Ignoring the cost entries, record the
b.) Assume the same information above except that the standalone selling price of the annual maintenance contract is not known because this was the first time Value Dealership offered the service. Value Dealership is uncertain as to what services, on average, a customer will take advantage of during the year of the contract. The Dealership researched competitor prices and determined that the average selling price for a maintenance service contract is $650. Ignoring the cost entries, record the journal entry in October 2020 for Value Dealership’s sale of vehicles to its customers.
c.) Assume the same information (original scenario) above except that the standalone selling price of the annual maintenance contract is not known because this was the first time Value Dealership offered the service. Value Dealership determined that the cost of the annual contract is $400 for the year and the expected profit margin on the service contract is 35%. Ignoring the cost entries, record the journal entry in October 2020 for Value Dealership’s sale of vehicles to its customers.
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