Question

Problem 18-01 (Part Level Submission) Grouper 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. Grouper 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 $491. The standalone selling price of the tablet is $246 (the cost to Grouper Company is $166). Grouper Company sells the Internet access service independently for an upfront payment of $291. On January 2, 2020, Grouper Company signed 110 contracts, receiving a total of $54,010 in cash. Grouper 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 $589. Grouper Company provides the 3-year tablet service plan as a separate product with a standalone selling price of $151. Grouper Company signed 210 contracts for Grouper Bundle B on July 1, 2020, receiving a total of $123,690 in cash. 2.

Answer 1

Requirement b:

Date	Account title and Explanation	Debit	Credit
July 1,2020	Cash [210 x $589]	$123,690
	Sales revenue [210 x $211]		$44,310
	Unearned service revenue-Internet [210 x $249]		$52,290
	Unearned service revenue-Tablet [210 x $129]		$27,090
	[To record sales]
	Cost of goods sold [210 x $166]	$34,860
	Inventory		$34,860
	[To record cost of goods sold]
Dec 31,2020	Unearned service revenue-Internet [52,290 x 6/36]	$8,715
	Unearned service revenue-Tablet [27,090 x 6/36]	$4,515
	Service revenue		$13,230
	[To record revenue earned from Unearned revenue]

Calculations:

i.Selling prices:

Standalone Selling Price
Tablet	$246	35.76%
Internet service	$291	42.30%
Tablet service plan	$151	21.95%
Total	$688	100%

Actual Selling Price
Tablet [589 x 35.76%]	$211
Internet service [589 x 42.30%]	$249
Tablet service plan [589 x 21.95%]	$129
Total	$589

ii. For Dec 31:

Services contracted for 36 months (3 years).

So, Revenue should be recognized for 6 months [July 1,2020 to Dec. 31,2020]