Question
Indigo Company sells tablet PCs combined with Internet service, which permits the tablet to connect to the Internet anywhere and set up a Wi-Fi hot
Indigo Company 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. | Indigo 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 $491. The standalone selling price of the tablet is $246 (the cost to Indigo Company is $166). Indigo Company sells the Internet access service independently for an upfront payment of $291. On January 2, 2017, Indigo Company signed 110 contracts, receiving a total of $54,010 in cash. | |
2. | Indigo 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 $589. Indigo Company provides the 3-year tablet service plan as a separate product with a standalone selling price of $151. Indigo Company signed 210 contracts for Indigo Bundle B on July 1, 2017, receiving a total of $123,690 in cash.
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Prepare any journal entries to record the revenue arrangement for Indigo Bundle A on January 2, 2017, and December 31, 2017.
Prepare any journal entries to record the revenue arrangement for Indigo Bundle B on July 1, 2017, and December 31, 2017.
Repeat the requirements for part (a), assuming that Indigo Company has no reliable data with which to estimate the standalone selling price for the Internet service.
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