Sandhill Company sells tablet PCs combined with Internet service, which permits the tablet to connect to the Internet anywhere and set up a Wi-Fi hot spot. It offers two bundles with the following terms. 1. Sandhill Bundle A sells a tablet with 3 years of Internet service. The price for the tablet and a 3-year Internet connection service contract is $455. The standalone selling price of the tablet is $234 (the cost to Sandhill Company is $171). Sandhill Company sells the Internet access service independently for an upfront payment of $270. On January 2, 2020, Sandhill Company signed 90 contracts, receiving a total of $40,950 in cash. 2. Sandhill Bundle B includes the tablet and Internet service plus a service plan for the tablet PC (for any repairs or upgrades to the tablet or the Internet connections) during the 3-year contract period. That product bundle sells for $551. Sandhill Company provides the 3-year tablet service plan as a separate product with a standalone selling price of $140. Sandhill Company signed 180 contracts for Sandhill Bundle B on July 1, 2020, receiving a total of $99,180 in cash. In response to competitive pressure for Internet access for Sandhill Bundle A, after 2 years of the 3-year contract, Sandhill Company offers a modified contract and extension incentive. The extended contract services are similar to those provided in the first 2 years of the contract. Signing the extension and paying $86 (which equals the standalone selling of the revised Internet service package) extends access for 2 more years of Internet connection. 50 Sandhill Bundle A customers sign up for this offer.
Sandhill Company sells tablet PCs combined with Internet service, which permits the tablet to connect to the Internet anywhere and set up a Wi-Fi hot spot. It offers two bundles with the following terms. 1. Sandhill Bundle A sells a tablet with 3 years of Internet service. The price for the tablet and a 3-year Internet connection service contract is $455. The standalone selling price of the tablet is $234 (the cost to Sandhill Company is $171). Sandhill Company sells the Internet access service independently for an upfront payment of $270. On January 2, 2020, Sandhill Company signed 90 contracts, receiving a total of $40,950 in cash. 2. Sandhill Bundle B includes the tablet and Internet service plus a service plan for the tablet PC (for any repairs or upgrades to the tablet or the Internet connections) during the 3-year contract period. That product bundle sells for $551. Sandhill Company provides the 3-year tablet service plan as a separate product with a standalone selling price of $140. Sandhill Company signed 180 contracts for Sandhill Bundle B on July 1, 2020, receiving a total of $99,180 in cash. In response to competitive pressure for Internet access for Sandhill Bundle A, after 2 years of the 3-year contract, Sandhill Company offers a modified contract and extension incentive. The extended contract services are similar to those provided in the first 2 years of the contract. Signing the extension and paying $86 (which equals the standalone selling of the revised Internet service package) extends access for 2 more years of Internet connection. 50 Sandhill Bundle A customers sign up for this offer.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
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Transcribed Image Text:Prepare the journal entry on December 31, 2022, for the 50 extended contracts (the fırst year of the revised 3-year contract).
(Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No
entry" for the account titles and enter O for the amounts. Round answers to O decimal places, e.g. 5,125.)
Account Titles and Explanation
Debit
Credit
Transcribed Image Text:Sandhill Company sells tablet PCs combined with Internet service, which permits the tablet to connect to the Internet anywhere and
set up a Wi-Fi hot spot. It offers two bundles with the following terms.
1.
Sandhill Bundle A sells a tablet with 3 years of Internet service. The price for the tablet and a 3-year Internet connection
service contract is $455. The standalone selling price of the tablet is $234 (the cost to Sandhill Company is $171). Sandhill
Company sells the Internet access service independently for an upfront payment of $270. On January 2, 2020, Sandhill
Company signed 90 contracts, receiving a total of $40,950 in cash.
Sandhill Bundle B includes the tablet and Internet service plus a service plan for the tablet PC (for any repairs or upgrades to
the tablet or the Internet connections) during the 3-year contract period. That product bundle sells for $551. Sandhill
Company provides the 3-year tablet service plan as a separate product with a standalone selling price of $140. Sandhill
Company signed 180 contracts for Sandhill Bundle B on July 1, 2020, receiving a total of $99,180 in cash.
In response to competitive pressure for Internet access for Sandhill Bundle A, after 2 years of the 3-year contract, Sandhill Company
offers a modified contract and extension incentive. The extended contract services are similar to those provided in the first 2 years of
the contract. Signing the extension and paying $86 (which equals the standalone selling of the revised Internet service package)
extends access for 2 more years of Internet connection. 50 Sandhill Bundle A customers sign up for this offer.
2.
Expert Solution
Step 1
| Date | Account title & Explanation | Debit | Credit |
| 2-Jan-22 | Cash ($86x50) | $4,300 | |
| Unearned service revenue | $4,300 | ||
| (To record the receipt of cash for sales and service) | |||
| 31-Dec-22 | Unearned service revenue | $2,789 | |
| Service revenue (((244/3)x50+4300)/3) | $2,789 | ||
| (To record the recognition of service revenue) |
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