Assume the same facts as in E17-5 and ignore E17-6. On July 1, 2019, the customer realizes that she needs a text messaging plan and adds an unlimited text messaging plan for the remaining term of the contract (18 months). The unlimited text messaging plan is priced at $15 per month. This is the current pricing for this plan available to all customers.

Required:
1. How should Loud account for this contract modification?
2. Provide Loud’s new monthly revenue recognition journal entry.

E17-5

On January 1, 2019, 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.