Question

On January 1, 2017, Loud Company enters into a 2-year contract with a customer for an...

On January 1, 2017, Loud Company enters into a 2-year contract with a customer for an unlimited talk and 5 GB data wireless plan for $65 per month. The contract includes a smartphone for which the customer pays $299. Loud also sells the smartphone and monthly service plan separately, charging $649 for the smartphone and $65 for the monthly service for the unlimited talk and 5 GB data wireless plan.

Required:

1. Calculate the transaction price for the smartphone and unlimited talk and 5 GB data wireless plan assuming that Loud allocates consideration based on stand-alone prices.
2. Record the initial journal entry for Loud Company’s sale of a 2-year contract on January 1, 2017, and the monthly journal entry.

Analysis

Calculate the transaction price for the smartphone and unlimited talk and 5 GB data wireless plan assuming that Loud allocates consideration based on stand-alone prices. Additional Instruction

Initial Stand-Alone Allocated
Consideration Selling Price Transaction Price
Smartphone
5 GB plan
Total consideration

General Journal

Record the initial journal entry for Loud Company’s sale of a 2-year contract on January 1, and the monthly journal entry on February 1. Additional Instruction

PAGE 1

GENERAL JOURNAL

DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT

1

2

3

4

5

6
Business   Accounting   
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