Problem # 1

PhreeWire Phones offers a number of plans to its mobile telephone customers. For example, a customer can receive a free phone when signing a 3-year contract for airtime and data that requires a monthly payment of $100. Alternately, the customer could pay $400 for the telephone when signing a 2-year contract requiring monthly payments of $120.

Required: Determine the amount of revenue to be recognized each year under the two different scenarios. Assume that the fair value of the telephone is $550 and the fair value of the airtime and data is $650 per year.

Problem # 2

Art Attack Ltd. ships the accounting period, The Print Haus notifies Art Attack Ltd. that 70% of the merchandise has been sold for $75,000. The Print Haus retains a 10% commission as well as $3,400, which represent merchandise on consignment to The Print Haus, a retailer of fine art prints. The cost of the merchandise is $68,000, and Art Attack pays the freight cost of $2,400 to ship the goods to the retailer. At the end of advertising costs it paid, and remits the balance owing to Art Attack Ltd.

Required: Complete the journal entries required by each company for the above transactions.