Spenders Company Is an Experienced Home Appliance Dealer

question 83

Multiple Choice

Spenders Company is an experienced home appliance dealer.Spenders Company also offers a number of services together with the home appliances that it sells (installation and maintenance) .Spenders Company sells dishwashers on a standalone basis, it also sells installation and maintenance service for the dishwashers.
Pricing for dishwashers is as follows:

In cases where maintenance services are provided, the maintenance service is separately priced within the arrangement at $350.Dishwashers are sold subject to a general right of return.If a customer purchases a dishwasher with installation and\or maintenance services, in the event Spenders Company does not complete the service satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds $1,600.On January 1, 2012, Spenders Company sells 100 dishwashers to Condo Complex, Inc.a developer of high-rise condos.The dishwashers are installed and Condo Complex, Inc.purchases the dishwashers with the installation and maintenance services.The total price for the 100 dishwashers is $190,000.How much revenue should Spenders Company allocate to the maintenance services?

• A)$-0-
• B)$33,250
• C)$35,000
• D)$30,000

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Definitions:

General Journal

The primary bookkeeping record in double-entry accounting, used to record all transactions by date, before they are posted to individual accounts in the general ledger.

Book of Original Entry

The Book of Original Entry refers to the initial record where financial transactions are documented chronologically.

Closing Entries

Journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts, thereby resetting the temporary accounts for the next period.

Account Balances

The amount of money in an account at a specific point in time, reflecting all transactions.