P18.1 (LO 2, 3) (Allocate Transaction Price, Upfront Fees) Tablet Tailors 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. Tablet 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 $500. The standalone selling price of the tablet is $250 (the cost to Tablet Tailors is $175). Tablet Tailors sells the Internet access service independently for an upfront payment of $300. On January 2, 2020, Tablet Tailors signed 100 contracts, receiving a total of $50,000 in cash. 2. Tablet 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 $600. Tablet Tailors provides the 3-year tablet service plan as a separate product with a standalone selling price of $150. Tablet Tailors signed 200 contracts for Tablet Bundle B on July 1, 2020, receiving a total of $120,000 in cash. Instructions a. Prepare any journal entries to record the revenue arrangement for Tablet Bundle A on January 2, 2020, and December 31, 2020. b. Prepare any journal entries to record the revenue arrangement for Tablet Bundle B on July 1, 2020, and December 31, 2020. c. Repeat the requirements for part (a), assuming that Tablet Tailors has no reliable data with which to estimate the standalone selling price for the Internet service. P18.2 (LO 2, 3, 4) (Allocate Transaction Price, Modification of Contract) Refer to the Tablet Bundle A revenue arrangement in P18.1. In response to competitive pressure for Internet access for Tablet Bundle A, after 2 years of the 3-year contract, Tablet Tailors offers a modified contract and extension incentive. The extended contract services are similar to those provided in the first 2 years of the contract. Signing the extension and paying $90 (which equals the standalone selling of the revised Internet service package) extends access for 2 more years of Internet connection. Forty Tablet Bundle A customers sign up for this offer. Instructions a. Prepare the journal entries when the contract is signed on January 2, 2022, for the 40 extended contracts. Assume the modification does not result in a separate performance obligation. b. Prepare the journal entries on December 31, 2022, for the 40 extended contracts (the first year of the revised 3-year contract).

P18.1 (LO 2, 3) (Allocate Transaction Price, Upfront Fees) Tablet Tailors 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. Tablet 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 $500. The standalone selling price of the tablet is $250 (the cost to Tablet Tailors is $175). Tablet Tailors sells the Internet access service independently for an upfront payment of $300. On January 2, 2020, Tablet Tailors signed 100 contracts, receiving a total of $50,000 in cash. 2. Tablet 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 $600. Tablet Tailors provides the 3-year tablet service plan as a separate product with a standalone selling price of $150. Tablet Tailors signed 200 contracts for Tablet Bundle B on July 1, 2020, receiving a total of $120,000 in cash. Instructions a. Prepare any journal entries to record the revenue arrangement for Tablet Bundle A on January 2, 2020, and December 31, 2020. b. Prepare any journal entries to record the revenue arrangement for Tablet Bundle B on July 1, 2020, and December 31, 2020. c. Repeat the requirements for part (a), assuming that Tablet Tailors has no reliable data with which to estimate the standalone selling price for the Internet service. P18.2 (LO 2, 3, 4) (Allocate Transaction Price, Modification of Contract) Refer to the Tablet Bundle A revenue arrangement in P18.1. In response to competitive pressure for Internet access for Tablet Bundle A, after 2 years of the 3-year contract, Tablet Tailors offers a modified contract and extension incentive. The extended contract services are similar to those provided in the first 2 years of the contract. Signing the extension and paying $90 (which equals the standalone selling of the revised Internet service package) extends access for 2 more years of Internet connection. Forty Tablet Bundle A customers sign up for this offer. Instructions a. Prepare the journal entries when the contract is signed on January 2, 2022, for the 40 extended contracts. Assume the modification does not result in a separate performance obligation. b. Prepare the journal entries on December 31, 2022, for the 40 extended contracts (the first year of the revised 3-year contract).

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 19E: Rix Company sells home appliances and provides installation and service for its customers. On April...

See similar textbooks

Instructions

a. Prepare any journal entries to record the revenue arrangement for Tablet Bundle A on January 2, 2020, and December 31, 2020.

b. Prepare any journal entries to record the revenue arrangement for Tablet Bundle B on July 1, 2020, and December 31, 2020.

c. Repeat the requirements for part (a), assuming that Tablet Tailors has no reliable data with which to estimate the standalone selling price for the Internet service.

P18.2 (LO 2, 3, 4) (Allocate Transaction Price, Modification of Contract) Refer to the Tablet Bundle A revenue arrangement in P18.1. In response to competitive pressure for Internet access for Tablet Bundle A, after 2 years of the 3-year contract, Tablet Tailors offers a modified contract and extension incentive. The extended contract services are similar to those provided in the first 2 years of the contract. Signing the extension and paying $90 (which equals the standalone selling of the revised Internet service package) extends access for 2 more years of Internet connection. Forty Tablet Bundle A customers sign up for this offer.

Instructions

a. Prepare the journal entries when the contract is signed on January 2, 2022, for the 40 extended contracts. Assume the modification does not result in a separate performance obligation.

b. Prepare the journal entries on December 31, 2022, for the 40 extended contracts (the first year of the revised 3-year contract).

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 4 steps with 6 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.