Refer to Exhibit 3, the accounting for iPhone sales under old subscription accounting standard. Describe and justify the complex journal entries of sale of a phone under at the sales quarter and in subsequent quarters. Make sure you label each account correctly (e.g. cash(+A)) and check balance sheet will remain balanced after these journal entries. How does Total Assets, Total Liabilities, and Net Income change after each sale in Q1 and Q2 through Q8?

Exhibit 3 Illustration of the iPhone Subscription Accounting Assume that Apple sold the iPhone 6s for $649 (without AppleCare+) and that Apple allocated $10 of revenue to the software deliverable. The software deliverable is excluded from the illustration below, reducing the revenue for the iPhone 6s to $639. After excluding the software deliverable, assume that the gross profit was $192 (30%). The subscription accounting for the iPhone sale would be as follows: Q1 (iPhone was sold to consumer): Dr. Cash 639 Cr. Revenue (1/8) Cr. Deferred Revenue (778) 80 559 Dr. Cost of Goods Sold (1/8) Dr. Deferred Cost of Goods Sold (7/8) 56 391 Cr. Inventory 447 Q2 to Q8 (remaining quarters of iPhone's economic life): Dr. Deferred Revenue 80 Cr. Revenue 80 Dr. Cost of Goods Sold 56 Cr. Deferred Cost of Goods Sold 56 Source: Casewriter. Note: "Dr." means "debit" and "Cr." means "credit." Exhibit 3 Illustration of the iPhone Subscription Accounting Assume that Apple sold the iPhone 6s for $649 (without AppleCare+) and that Apple allocated $10 of revenue to the software deliverable. The software deliverable is excluded from the illustration below, reducing the revenue for the iPhone 6s to $639. After excluding the software deliverable, assume that the gross profit was $192 (30%). The subscription accounting for the iPhone sale would be as follows: Q1 (iPhone was sold to consumer): Dr. Cash 639 Cr. Revenue (1/8) Cr. Deferred Revenue (778) 80 559 Dr. Cost of Goods Sold (1/8) Dr. Deferred Cost of Goods Sold (7/8) 56 391 Cr. Inventory 447 Q2 to Q8 (remaining quarters of iPhone's economic life): Dr. Deferred Revenue 80 Cr. Revenue 80 Dr. Cost of Goods Sold 56 Cr. Deferred Cost of Goods Sold 56 Source: Casewriter. Note: "Dr." means "debit" and "Cr." means "credit