Question - Lammel windows company entered into a contract on February 1, 2016, to manufacture and install windows to ajax company's new office building. Lammel installed windows that are manufactured as a free benefit to its customers. In other words, the contract price for the windows would be the same regardless of whether or not Lammel does the installation.
The contract price for the windows is $20,000,000. Ajax requests that Lammel installs the windows.
The contracts require Ajax to pay $15,000,000 on the day the windows are delivered and to pay the remaining $5,000,000 the day that installation is completed. Even though Lammel does not make a separate charge for installing the windows, the fair value of the installation is $1,000,000.
Lammel delivers the windows on November 1, 2016. Installation is completed on December 31, 2016.
Required: Prepare the necessary journal entries for Lammel for November 1 and December 31.