Question

Problem 18-01 (Part Level Submission) Grouper 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. Grouper 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 $491. The standalone selling price of the tablet is $246 (the cost to Grouper Company is $166). Grouper Company sells the Internet access service independently for an upfront payment of $291. On January 2, 2020, Grouper Company signed 110 contracts, receiving a total of $54,010 in cash. Grouper 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 $589. Grouper Company provides the 3-year tablet service plan as a separate product with a standalone selling price of $151. Grouper Company signed 210 contracts for Grouper Bundle B on July 1, 2020, receiving a total of $123,690 in cash. (a) Your answer is correct. Prepare any journal entries to record the revenue arrangement for Grouper 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.) Account Titles and Explanation Debit Credit Date Jan. 2, 2020 Cash 54010 1 Unearned Service Reve DO PE 29260 24750 Sales Revenue (To record sales) Cost of Goods Sold 182601

Answer 1

Requirement c:

Date	Account title and Explanation	Debit	Credit
Jan. 2,2020	Cash [110 x $491]	$54,010
	Unearned service revenue [110 x $245*]		$26,950
	Sales revenue [110 x $246]		$27,060
	[To record sales
	Cost of goods sold [110 x $166]	$18,260
	Inventory		$18,260
	[To record cost of goods sold]
Dec.31, 2020	Unearned service revenue	$8,983
	Service revenue		$8,983
	[To record revenue from unearned revenue]

*Calculations:

If Grouper Company has no reliable date with which to estimate the standalone selling price for the Internet service then,

Contract price	$491
(Less): Standalone price of the tablet	($246)
Price of the Internet service	$245

For Dec.31,2020:

Given that internet service contracted for 3 years.

So, Service revenue for 2020 should be calculated for one year (Jan 2,2020 to Dec.31,2020).

Therefore service revenue = $26,950 x 1/3 = $8,983