Intermediate Accounting (ACCT 3103 and 311 Accounting, 16e TANDARD PRINTER VERSI

Question

Intermediate Accounting (ACCT 3103 and 311 Accounting, 16e TANDARD PRINTER VERSION ·BACK Problem 18-1 Headland Company sells tablet PCs combined with Internet service, which permits the tablet to connect to the Internet anywhere and set up a Wi-Fi hot spot. It offers two bundles with the following terms. 1. Headland Bundle A sells a tablet with 3 years of Internet service. The price for the tablet and a 3-year Internet connection service contract is $455. The standalone selling price of the tablet is $234 (the cost to Headland Company is $171). Headland Company sells the Internet access service independently for an upfront payment of $270. On January 2, 2017, Headland Company signed 90 contracts, receiving a total of $40,950 in cash. 2. Headland Bundle B includes the tablet and Internet service plus a service plan for the tablet PC (for any repairs or upgrades to the tablet or the Internet connections) during the 3-year contract period. That product bundle sells for $551. Headland Company provides the 3-year tablet service plan as a separate product with a standalone selling price of $140. Headland Company signed 180 contracts for Headland Bundle B on July 1, 2017, receiving a tota of $99,180 in cash. Prepare any journal entries to record the revenue arrangement for Headland Bundle A on January 2, 2017, and December 31, 2017. (Credit account titles a automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles an enter O for the amounts. Round answers to O decimal places, e.g.5,125.) Date Account Titles and Explanation Debit Credit (To record sales) To record cost of goods sold) LINK TO TEXT LINK TO TEXT

Explanation / Answer

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Note: The allocation of bundled price is rounded off to 0 decimal places. If it is not rounded off and only final answers are rounded off then there is a rounding off difference of $1.

Date Account Titles and Explanation Debit Credit Jan. 2, 2017 Cash (90 x $455) 40950 Sales revenue (90 x $211) 18990 Unearned service revenue (90 x $244) 21960 (To record sales) Cost of goods sold (90 x $171) 15390 Inventory 15390 (To record cost of goods sold) Dec. 31, 2017 Unearned service revenue ($21960 x 1/3) 7320 Service revenue 7320 (To record service revenue earned)

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