Question

Crane 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.
(A):Prepare any journal entries to record the revenue arrangement for Crane Bundle A on January 2, 2020, and December 31, 2020.

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

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

1.		Crane 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 $488. The standalone selling price of the tablet is $252 (the cost to Crane Company is $178). Crane Company sells the Internet access service independently for an upfront payment of $285. On January 2, 2020, Crane Company signed 90 contracts, receiving a total of $43,920 in cash.
2.		Crane 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 $597. Crane Company provides the 3-year tablet service plan as a separate product with a standalone selling price of $154. Crane Company signed 190 contracts for Crane Bundle B on July 1, 2020, receiving a total of $113,430 in cash.

Answer 1

Part 1

Bundle A
			Amount
Standalone selling price of the tablet			252
Standalone Service price of Internet access			285
Total price			537
Total combined price			488
	Allocated value	Multiply: number of contract	Total allocated value
Price of the tablet (488*252/537)	229	90	20,611
Price of Internet access (488*285/537)	259	90	23,309
Total combined price	488	90	43,920

Bundle A
Journal entries
Date	General Journal	Debit	Credit
January 2, 2020	Cash	43,920
	Sales Revenue		20,611
	Unearned Internet access service revenue		23,309
	(To record signed 90 contracts, receiving a total of $43,920 in cash.)
	Cost of goods sold	16,020
	Inventory		16,020
	(To record cost of goods sold) (90*178)
December 31, 2020	Unearned Internet access service revenue	7,770
	Internet access service revenue		7,770
	(To record Internet access service revenue for one year.) (23309/3)

Part 2

Bundle B
			Amount
Standalone selling price of the tablet			252
Standalone Service price of Internet access			285
Standalone Service price of Repair			154
Total price			691
Total combined price			597
	Allocated value	Multiply: number of contract	Total allocated value
Price of the tablet (597*252/691)	218	190	41,367
Price of Internet access (597*285/691)	246	190	46,784
Price of Repairs Service (597*154/691)	133	190	25,280
Total combined price	597	190	113,430

Bundle B
Journal entries
Date	General Journal	Debit	Credit
July 1, 2020	Cash	113,430
	Sales Revenue		41,367
	Unearned Internet access service revenue		46,784
	Unearned Repair service revenue		25,280
	(To record signed 190 contracts, receiving a total of $113,430 in cash.)
	Cost of goods sold	33,820
	Inventory		33,820
	(To record cost of goods sold) (190*178)
Dec 31, 2020	Unearned Internet access service revenue	7,797
	Internet access service revenue		7,797
	(To record Internet access service revenue for Six month.) ((46784/3)*6/12)
Dec 31, 2020	Unearned Repair service revenue	4,213
	Repair service revenue		4,213
	(To record Repair service revenue for Six month.) ((25280/3)*6/12)

Part 3

Bundle A
Journal entries
Date	General Journal	Debit	Credit
January 2, 2020	Cash	43,920
	Sales Revenue (252*90)		22,680
	Unearned Internet access service revenue ((488-252)*90)		21,240
	(To record signed 90 contracts, receiving a total of $43,290 in cash.)
	Cost of goods sold	16,020
	Inventory		16,020
	(To record cost of goods sold) (90*178)
December 31, 2020	Unearned Internet access service revenue	7,080
	Internet access service revenue		7,080
	(To record Internet access service revenue for one year.) (21240/3)