Question

Pronghorn 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. Pronghorn 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 Pronghorn Company is $171). Pronghorn Company sells the Internet access service independently for an upfront payment of $270. On January 2, 2017, Pronghorn Company signed 90 contracts, receiving a total of $40,950 in cash. Pronghorn 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. Pronghorn Company provides the 3-year tablet service plan as a separate product with a standalone selling price of $140. Pronghorn Company signed 180 contracts for Pronghorn Bundle B on July 1, 2017, receiving a total of $99,180 in cash. 2. (a) Your answer is correct. Prepare any journal entries to record the revenue arrangement for Pronghorn Bundle A on January 2, 2017, and December 31, 2017. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter o for the amounts. Round answers to o decimal places, e.g. 5,125.) Debit Credit Date Jan. 2, 2017 Account Titles and Explanation Cash 095011 u Sales Revenue IN 19012 1 Unearned Service Revenue - Internet 21938 (To record sales)

Answer 1

Without roundoff

Bundle B contains three different performance obligations: (1) the tablet, (2) internet service, and (3) tablet service plan
						standalone	Contract price	Allocation
Tablet	234	551	$                200
internet service	270	551	$                231
tablet service plan	140	551	$                120
total estimated price	644		$                551
So entries
July 1 2017
No. 1
Cash	$ 99,180.00
Unearned service revenue (Internet)		$   41,581.68
Unearned service revenue (maintenance)		$   21,560.87
Sales revenue		$   36,037.45
No.2
Cost of goods sold	$ 30,780.00
inventory		$   30,780.00
No.3
Unearned service revenue (Internet)	$    6,930.28		41581.67/3*6/12
Unearned service revenue (maintenance)	$    3,593.48		21560.87/3*6/12
Service revenue		$   10,523.76

WITH ROUNDOFF

Bundle B contains three different performance obligations: (1) the tablet, (2) internet service, and (3) tablet service plan
						standalone	Contract price	Allocation
Tablet	234	551	$                200
internet service	270	551	$                231
tablet service plan	140	551	$                120
total estimated price	644		$                551
So entries
July 1 2017
No. 1
Cash	99180
Unearned service revenue (Internet)		41580
Unearned service revenue (maintenance)		21600
Sales revenue		36000
No.2
Cost of goods sold	30780
inventory		30780
No.3
Unearned service revenue (Internet)	6930		41580/3*6/12
Unearned service revenue (maintenance)	3600		21600/3*6/12
Service revenue		10530