On January 1, 2017, Loud Company enters into a 2-year contract with a customer for an unlimited talk and 5 GB data wireless plan for $65 per month. The contract includes a smartphone for which the customer pays $299. Loud also sells the smartphone and monthly service plan separately, charging $649 for the smartphone and $65 for the monthly service for the unlimited talk and 5 GB data wireless plan. On July 1, 2017, 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 $55 per month. The $55 per month is Loud's current stand- alone price for this plan that is available to all customers. Required: 1. How should Loud account for this contract modification? 2. Provide Loud's new monthly revenue recognition journal entry. How should Loud account for this contract modification? Additional Instruction 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 month. GENERAL JOURNAL Score: 33/37 Date Account 7/1 Cash Contract Recievable Sales Revenue to allocate to the remaining 18 months of service, or post ref debit $55.00 credit ????? ????? per
On January 1, 2017, Loud Company enters into a 2-year contract with a customer for an unlimited talk and 5 GB data wireless plan for $65 per month. The contract includes a smartphone for which the customer pays $299. Loud also sells the smartphone and monthly service plan separately, charging $649 for the smartphone and $65 for the monthly service for the unlimited talk and 5 GB data wireless plan. On July 1, 2017, 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 $55 per month. The $55 per month is Loud's current stand- alone price for this plan that is available to all customers. Required: 1. How should Loud account for this contract modification? 2. Provide Loud's new monthly revenue recognition journal entry. How should Loud account for this contract modification? Additional Instruction 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 month. GENERAL JOURNAL Score: 33/37 Date Account 7/1 Cash Contract Recievable Sales Revenue to allocate to the remaining 18 months of service, or post ref debit $55.00 credit ????? ????? per
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
N11.
Account
Transcribed Image Text:On January 1, 2017, Loud Company enters into a 2-year contract with a customer for an unlimited talk and 5 GB data
wireless plan for $65 per month. The contract includes a smartphone for which the customer pays $299. Loud also sells
the smartphone and monthly service plan separately, charging $649 for the smartphone and $65 for the monthly service
for the unlimited talk and 5 GB data wireless plan. On July 1, 2017, 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 $55 per month. The $55 per month is Loud's current stand-
alone price for this plan that is available to all customers. Required: 1. How should Loud account for this contract
modification? 2. Provide Loud's new monthly revenue recognition journal entry.
How should Loud account for this contract modification? Additional Instruction
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
month.
GENERAL JOURNAL
Score: 33/37
Date Account
7/1
Cash
Contract Recievable
Sales Revenue
to allocate to the remaining 18 months of service, or
post ref
debit
$55.00
credit
?????
?????
per
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education