On July 1, 2014, Legoria Co. shipped software to a customer. The arrangement with a customer also requires the company to provide technical support over the next 12 month and to ship an expected software upgrade on January 1, 2015. The total contract price is $243,000, which was paid in advance on July 1, 2014. Legoria Co. estimates that the fair values of the components of the “arrangement” if sold separately would be:
Software $210,000
Technical Support 30,000
Upgrade 30,000
Required:
1) Assume Legoria is a December 31, 2014 year end firm. Determine the timing of revenue recognition for each of the arrangements and the amounts for these “multiple Deliverables.”
2) Prepare the journal entry to record the cash receipt [ignore cost of goods sold].