Question

Blossom 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. Blossom 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 $506. The standalone selling price of the tablet is $234 (the cost to Blossom Company is $167). Blossom Company sells the Internet access service independently for an upfront payment of $324. On January 2, 2020, Blossom Company signed 90 contracts, receiving a total of $45,540 in cash. Blossom 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 $612. Blossom Company provides the 3-year tablet service plan as a separate product with a standalone selling price of $155. Blossom Company signed 190 contracts for Blossom Bundle B on July 1, 2020, receiving a total of $116,280 in cash. 2. Prepare any journal entries to record the revenue arrangement for Blossom Bundle A on January 2, 2020, and December 31, 2020. (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.) Date Account Titles and Explanation Debit Credit (To record sales) (To record cost of goods sold)

Answer 1

Requirement 1:

Date	Account title and Explanation	Debit	Credit
Jan 2,2020	Cash [90 x $506]	$45,540
	Sales revenue [90 x $212]		$19,080
	Unearned service revenue [90 x $294]		$26,460
	[To record sales]
	Cost of goods sold [90 x $167]	$15,030
	Inventory		$15,030
	[To record cost of goods sold]
Dec 31,2020	Unearned service revenue	$8,820
	Service revenue [26,460 x 1/3]		$8,820
	[To record revenue earned from Unearned revenue]

Calculations:

Standalone Selling price
Tablet	$234	41.94%
Internet service	$324	58.06%
Total	$558	100%
Actual Selling price
Tablet [$506 x 41.94%]		$212
Internet service [$506 x 58.06%]		$294
Total		$506

Requirement 2:

Date	Account title and Explanation	Debit	Credit
July 1, 2020	Cash [190 x $612]	$116,280
	Sales revenue [190 x $201]		$38,190
	Unearned service revenue-Internet [190 x $278]		$52,820
	Unearned service revenue-Tablet [190 x $133]		$25,270
	[To record sales]
	Cost of goods sold [190 x $167]	$31,730
	Inventory		$31,730
	[To record cost of goods sold]
Dec 31,2020	Unearned service revenue-Internet [52,820 x 6/36]	$8,803
	Unearned service revenue-Table [25,270 x 6/36]	$4,212
	Service Revenue		$13,015
	[To record revenue earned from Unearned revenue]

Calculations:

Standalone Selling price
Tablet	$234	32.82%
Internet service	$324	45.44%
Table service	$155	21.74%
Total	$713	100%
Actual Selling price
Tablet [$612 x 32.82%]		$201
Internet service [$612 x 45.44%]		$278
Table service [$612 x 21.74%]		$133
Total		$612

Requirement 3:

Date	Account title and Explanation	Debit	Credit
Jan 2,2020	Cash [90 x $506]	$45,540
	Sales revenue [90 x $234]		$21,060
	Unearned service revenue [90 x $272]		$24,480
	[To record sales]
	Cost of goods sold [90 x $167]	$15,030
	Inventory		$15,030
	[To record cost of goods sold]
Dec 31,2020	Unearned service revenue	$8,160
	Service revenue [24,480 x 1/3]		$8,160
	[To record revenue earned from Unearned revenue]

Calculations:

Total selling price of Bundle A	$506
Stand alone price of Tablet	($234)
Selling price of internet	$272