Tyler’s Tablets 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:
Bundle A sells a tablet with 3 years of Internet service for $ 500.The standalone selling price of the tablet is $ 250 (with a cost of $ 175).Tyler’s Tablets sells the Internet access service independently for an upfront payment of $ 300.On January 2, 2016, Tyler’s Tablets signed 100 contracts and received $ 50,000 in cash.
Bundle B includes the tablet, 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.The product bundle sells for $ 600.Tyler’s Tablets provides a 3-year tablet service plan as a separate product with a standalone selling price of $ 150.The firm signed 200 contracts for Bundle B on July 1, 2016 and received a total of $ 120,000 in cash.
Prepare any required 2016 journal entries for Bundle A for January 2 and December 31.
Prepare any required 2016 journal entries for Bundle B for July 1 and December 31.
Assume there is no reliable data with which to estimate the standalone selling price for the Internet service. Repeat requirement (a).