On January 1, Year 1, Loud Company enters into a 2-year contract with a customer for an unlimited talk and 5 GB data wireless plan for $68.00 per month. The contract includes a smart phone for which the customer pays $289.00. Loud also sells the smart phone and monthly service plan separately, charging $649.00 for the smart phone and $68.00 for the monthly service for the unlimited talk and 5 GB data wireless plan. On July 1, Year 1, the customer realizes that she needs less data in her wireless plan and downgrades to the unlimited talk and 2 GB data plan for the remaining term of the contract (18 months). The unlimited talk and 2 GB data plan is priced at $51.00 per month. The $51.00 per month is Loud's current stand-alone price for this plan that is available to all customers. Loud has appropriately determined that the modification should be accounted for prospectively. Required: 1. How should Loud account for this contract modification? 2. Provide Loud's new monthly revenue recognition journal entry The contract modification does not add goods or services to the arrangement; therefore, this modification cannot be treated as a separate contract. However, to determine the appropriate accounting for the modification, the entity has to assess whether the remaining goods and services (18 months of service) are distinct from the goods and services already provided to the customer (handset and 6 months of services). On July 1, the contract receivable has a remaining balance of $ As a result, the entity has S to allocate to the remaining 18 months of service, or $ per month. Points: 3/6 2. Prepare the journal entry to record the cash received for the monthly service plan on July 1. General Journal Instructions How does grading work? < 1 7 DATE Jul. 1 Cash Contract Receivable Sales Revenue GENERAL JOURNAL POST. REF DEBIT ACCOUNT TITLE PAGE 1 Score: 24/37 CREDIT