Question

Horizons, Inc. sells mobile phones, wireless plans, and service plan packages. Horizons packages the following items for sale.

Package                    Amount       Description

Phone                         $199.00       Paid when customer purchases the phone.

Wireless Plan per month 40.00       Unlimited calling. Minimum coverage of 12-months. Paid monthly.

Service Plan per month   24.00       12-month coverage. Paid when customer purchases the phone.

Total When Purchased$263.00

Horizons has determined that each item is a separate performance obligation. A customer purchases

a new phone package on September 1.

Required:

Explain how and when revenue is recognized. Prepare the journal entries for the month of September, assuming that Horizons makes adjusting entries on September 30. (9 points)

Answer 1

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