Sandhill 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. Sandhill 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 Sandhill Company is $171). Sandhill Company sells the Internet access service independently for an upfront payment of $270. On January 2, 2020, Sandhill Company signed 90 contracts, receiving a total of $40,950 in cash. 2. Sandhill 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. Sandhill Company provides the 3-year tablet service plan as a separate product with a standalone selling price of $140. Sandhill Company signed 180 contracts for Sandhill Bundle B on July 1, 2020, receiving a total of $99,180 in cash. In response to competitive pressure for Internet access for Sandhill Bundle A, after 2 years of the 3-year contract, Sandhill Company 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 $86 (which equals the standalone selling of the revised Internet service package) extends access for 2 more years of Internet connection. 50 Sandhill Bundle A customers sign up for this offer.
Sandhill 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. Sandhill 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 Sandhill Company is $171). Sandhill Company sells the Internet access service independently for an upfront payment of $270. On January 2, 2020, Sandhill Company signed 90 contracts, receiving a total of $40,950 in cash. 2. Sandhill 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. Sandhill Company provides the 3-year tablet service plan as a separate product with a standalone selling price of $140. Sandhill Company signed 180 contracts for Sandhill Bundle B on July 1, 2020, receiving a total of $99,180 in cash. In response to competitive pressure for Internet access for Sandhill Bundle A, after 2 years of the 3-year contract, Sandhill Company 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 $86 (which equals the standalone selling of the revised Internet service package) extends access for 2 more years of Internet connection. 50 Sandhill Bundle A customers sign up for this offer.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter8: Current And Contingent Liabilities
Section: Chapter Questions
Problem 3MCQ
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Step 1
Date | Account title & Explanation | Debit | Credit |
2-Jan-22 | Cash ($86x50) | $4,300 | |
Unearned service revenue | $4,300 | ||
(To record the receipt of cash for sales and service) | |||
31-Dec-22 | Unearned service revenue | $2,789 | |
Service revenue (((244/3)x50+4300)/3) | $2,789 | ||
(To record the recognition of service revenue) |
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