Saratoga Cabinets manufactures and sells custom storm Cabinets for kitchens. Saratoga also
provides installation service for the Cabinets. The installation process does not involve changes
in the Cabinets, so this service can be provided by other vendors. Saratoga enters into the
following contract on June 1, 2018, with a local homeowner. The customer purchases Cabinets
for a price of $4,700 and chooses Saratoga to do the installation. Saratoga charges the same
price for the Cabinets irrespective of whether it does the installation or not. The price of the
installation service is estimated to have a fair value of $1,200.
The customer pays Saratoga $4,000 (which equals the fair value of the Cabinets, which have a
cost of $2,300) upon delivery and the remaining balance upon installation of the Cabinets. The
Cabinets are delivered on August 1, 2018, Saratoga completes installation on September 15,
2018, and the customer pays the balance due. Prepare the journal entries for Saratoga in 2018.
(Round amounts to nearest dollar.)
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