Megabyte Software Developers shipped its tax return preparation product to a customer on September 15, 2008. In addition to the software, Megabyte’ contract requires the company to provide (1) training to the customer’s accounting staff during October of 2008, (2) technical product support for one year starting October 1, 2008, and (3) an upgrade early in 2009 to the software that reflects last-minute changes in tax laws affecting tax returns for 2008. The customer paid the total contract price of $85,000 prior to product shipment. Megabyte would charge the following if these individual contract elements were sold separately:

Required:
1. Prepare a journal entry to record receipt of the cash payment.
2. Determine the amount of revenue to be recognized in 2008 and prepare the necessary journal entry.

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Tax return preparation softwar Training customer's staff Customer support Software upgrade Total fair value Fair Value $ 70,000 10,000 15,000 5,000 $100,000