Assignment #1: Revenue Recognition Due: Sunday, Week 4 Points: 75 I. Allocate Transaction Price, Upfront Fees Tablet Tailors sells tablet PCs combined with Internet service, which permits the tablet to connect to the Internet anywhere and set up a Wi-Fi hot spot. It offers two bundles with the following terms. 1. Tablet Bundle A sells a tablet with 3 years of Internet service. The price for the tablet and a 3-year Internet connection service contract is $500. The standalone selling price of the tablet is $250 (the cost to Tablet Tailors is $175). Tablet Tailors sells the Internet access service independently for an upfront payment of $300. On January 2, 2020, Tablet Tailors signed 100 contracts, receiving a total of $50,000 in cash. 2. Tablet Bundle B includes the tablet and Internet service plus a service plan for the tablet PC (for any repairs or upgrades to the tablet or the Internet connections) during the 3-year contract period. That product bundle sells for $600. Tablet Tailors provides the 3-year tablet service plan as a separate product with a standalone selling price of $150. Tablet Tailors signed 200 contracts for Tablet Bundle B on July 1, 2020, receiving a total of $120,000 in cash. Instructions: (a) Prepare any journal entries to record the revenue arrangement for Tablet Bundle A on January 2, 2020, and December 31, 2020. (b)Prepare any journal entries to record the revenue arrangement for Tablet Bundle B on July 1, 2020, and December 31, 2020. (c) Repeat the requirements for part (a), assuming that Tablet Tailors has no reliable data with which to estimate the stand-alone selling price for the Internet service. II. Five-Step Revenue Process Revenue is recognized based on a five-step process that is applied to a companys revenue arrangements. Instructions: (a) Briefly describe the five-step process. (b) Explain the importance of contracts when analyzing revenue arrangements. (c) How are fair value measurement concepts applied in the implementation of the five-step process? (d) How does the five-step process reflect the application of the definitions of assets and liabilities?

B B E F H 1 J K L L M N O P T U 4 5 6 6 7 7 8 9 10 11 12 13 Note about journal entry format: Enter debits first: if more than one debit, list in descending order (highest amount first) Enter credits second: If more than one credit, list in descending order (highest amount first) *Use the rounded whole numbers in your final calculations for the journal entries. *Points may be deducted for incorrect account names Jan. 2 Cash (round to the nearest whole dollar) 227 273 14 15 16 17 18 19 20 Debit Credit 50.000 Unearned service revenue Sales revenue (To record revenue and unearned revenue for Jan. 2 revenue agreement.) Standalone price per contract Allocation per contra Enter cacluation into cells Standalone Price: Tablet $250 Tablet 227 Standalone Price: $ 300 Internet $ 273 Total standalone price $550 'Total $ 500 'Total should equal the sales revenue per contract. Jan. 2 17,500 Cost of goods sold Inventory (To record COGS) GRADING Parta) Cell Ref Correct/Incorrect Points awarded 015 CORRECT 1.0 016 CORRECT 1.0 G15 CORRECT 1.0 H16 INCORRECT 0.0 H17 INCORRECT 0.0 G20 CORRECT 2.5 H21 CORRECT 2.5 G24 INCORRECT 0.0 H25 INCORRECT 0.0 Total for part (a) 8 17,500 Dec. 31 21 22 23 24 25 26 27 28 Unearned Service Revenue Service Revenue (To record revenue for internet service provided in 2020) B E F H 1 J K L N P Q T U U Jul. 1 Cash (round to the nearest whole dollar) 28 29 30 31 32 33 34 35 36 37 Debit Credit 120,000 Unearned service revenue - Internet Unearned service revenue - Maintenance Sales revenue (To record revenue and unearned revenue for Jul revenue agreement.) Standalone price per contract Allocation per contra Enter cacluation into cells Allocated to Tablet Tablet Allocated to Internet Internet Allocated to Tablet Tablet Service Plan Total estimated standaloni $ - "Total "Total should equal the sales revenue per contract. Jul. 1 35,000 Cost of goods sold Inventory (To record COGS) 38 39 35,000 GRADING Part (b) Cell Ref Correct/Incorrect Points awarded 032 INCORRECT 0.0 033 INCORRECT 0.0 034 INCORRECT 0.0 G31 CORRECT 1.0 H32 INCORRECT 0.0 H33 INCORRECT 0.0 H34 INCORRECT 0.0 G37 CORRECT 2.5 H38 CORRECT 2.5 G41 INCORRECT 0.0 G43 INCORRECT 0.0 H43 INCORRECT 0.0 Total for part (b) 6 40 Dec. 31 41 42 Unearned service revenue - Internet Unearned service revenue - Maintenance Service revenue (To record revenue for internet and maintenance services provided in 2020) 43 44 45 46 27 47 48 49 (round to the nearest whole dollar) Credit Jan. 2 Debit 50,000 Cash 50 51 Unearned Service Revenue (Internet) Unearned Service Revenue (Tablet) 25,000 25,000 Standalone price per contract Allocation per contra. Enter cacluation into cells Allocated to Tablet Tablet Allocated to Internet Internet Total "Total $ "Total should equal the sales revenue per contract. 52 53 Jul. 1 COGS 17,500 Inventory 17,500 GRADING Part (c) Cell Ref Correct/Incorrect Points awarded 049 INCORRECT 0.0 050 INCORRECT 0.0 G49 CORRECT 10 H50 CORRECT 2.0 H51 CORRECT 2.0 G53 CORRECT 2.0 H54 CORRECT 2.0 G56 CORRECT 2.5 H57 CORRECT 2.5 Total for part (0) 14 Dec. 31 8,333 Unearned Service Revenue (Internet) Service Revenue (To record revenue for internet service provided in 2020) 54 55 56 57 59 59 60 61 62 63 64 8,333 TOTAL 28 Assign 1_Rev Recognition