The domestic DVD segment has seen significant decline in recent years. the number of DVD subscribers has declined by 56% and 24% over the last two years, respectively. The declining trend is likely due to the availablity of many blockbusters through pay-per-view offered by cable providers and the availability of DVDs through different mediums.

Since the Domestic DVD segment has provided a strong contribution to the overall profitability of Teleflix, management decided to explore different options for revamping the service offering. Accordingly, on July 1, 2020, the company launched TeleBox, a digitally automated distribution system that allows subscribers to rent DVDs and Blu-rays at various locations across Canada. the TeleBox is similar yo a candy-vending machine, but it allows subscribers to receive and return discs. Discs can be returned at any TeleBox locations. During the year, the company launched the concept in several large Canadian cities.

Required:

Provide the recommendation with journal entries. Advise the effect on net income and Debt/Equity ratio.

Exhibits: