A service plan for tablet pc covering the 4-year contract

Reference no: EM13488173

Consider the following information and respond to the requirements indicated.

(a) In response to competitive pressures for the Internet access service for Bundle A, at the end of the second year of the 4-year contract, Tablet Tailors 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 $120 (which equals the fair value of the revised service package) extends access for 2 more years of Internet connection. Assuming 40 Bundle A customers sign up for this offer, prepare the journal entries when the contract is signed in January 2, 2016, and at December 31, 2016, for those contracts. Assume the modification does not result in a separate performance obligation.

(b) 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.

Reference no: EM13488173

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