ablet Tailors sells tablet PCs combined with Internet service (Tablet Bundle A)

Question

ablet Tailors sells tablet PCs combined with Internet service (Tablet Bundle A) that permits the tablet to connect to the Internet anywhere (set up a Wi-Fi hot spot). The price for the tablet and a 4-year Internet connection service contract is $500. The standalone selling price of the tablet is $250 (cost to Tablet Tailors $175). Tablet Tailors sells the Internet access service independently for an upfront payment of $100, plus $72 payments at the beginning of years 2–4 of the contract. With an imputed interest rate of 8%, the standalone value of the service is $286. On January 2, 2014, Tablet Tailors signed 100 contracts, receiving a total of $31,445 in cash (full payment of $500 each in cash, less the present value of the note for the future service plan payments), delivered tablets, and started service for 100 tablet packages.

Tablet Tailors offers a second package (Tablet Bundle B) which includes a service plan for the tablet PC covering the 4-year contract period. That product bundle sells for $600. Tablet Tailors provides the tablet service as a separate product with a standalone selling price of $160.

Prepare any journal entries to record the sale of 200 of these packages on January 2, 2014.

Explanation / Answer

Journal entries for the signing the 200 contracts:

Debit Cash $31445

Debit Accounts Receivable $68555

Credit Sales revenue $100000

(being 200 packages sold @ 500 per contract)

Debit Cost of goods sold $35000

Credit Tablet PC inventory $35000

(being cost of goods sold booked)

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.