Question

BoTeck is a full-service technology company. It provides equipment, installation services, and training services. Customers can purchase any product or service separately or as a bundled package. On May 3, Box-Rite Corporation purchased computer equipment, installation, and training for a total cost of $120,000. Estimated stand-alone fair values of the equipment, installation, and training are $75,000, $50,000, and $25,000 respectively. The journal entry to record the sale and installation on May 3 will include a. credit to Unearned Service Revenue of $20,000. b. credit to Sales Revenue for $120,000. c. credit to Service Revenue of $50,000. d. debit to Unearned Service Revenue of $25,000.

Answer 1

Stand-alone fair values :
Equipment	75000
Installation	50000
Training	25000
Total	150000
Allocated to:
Equipment	60000	=120000*75000/150000
Installation	40000	=120000*50000/150000
Training	20000	=120000*25000/150000
Total	120000
The journal entry to record the sale and installation on May 3 is:
	Debit	Credit
Cash	120000
Sales revenue		60000
Service Revenue		40000
Unearned Service Revenue		20000
credit to Unearned Service Revenue of $20,000.
Option A is correct