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Sky Communications (SKY) usually sells a cell phone for $448 plus 12 months of cellular service for $672. SKY has a special, time-limited offer in which it gives the phone for free and sells the 12 months of cellular service for $560. Each phone costs SKY $280, which it accounts for in its perpetual inventory system. On July 1, SKY sells one of the special packages, delivers the phone, collects the $560 cash, and starts the cellular service.
What journal entries would SKY record on July 1 and July 31?

a. Record receipt of cash.
b. Record the sales of cellular service for 12 months.
c. Record the cost of goods sold.
d. Record the deferred revenue.

Respuesta :

Explanation:

The Journal Entry from July 1 and July 31 is shown below:-

1. Cash Dr,                                             $560

            To Deferred revenue                                  $560

(Being cash is received)

2. Deferred revenue                             $336

            To Sales revenue                                         $336

(Being 12 months sales service is recorded)

3. Cost of goods sold                            $280

            To Inventory                                                 $280

(Being cost of goods sold is recorded)

4. Deferred revenue ($336 ÷ 12)            $28

            To Service revenue                                      $28

(Being Deferred service revenue is recorded)

Working Note:-

Cellular service revenue = offer price ÷ total cost of phone and service × cellular service

= (($560 ÷ ($448 + $672)) × $672

= $336

The journal entries for each and every transaction is shown below.

Journal entries:

a. For recording the cash receipt:

Cash Dr,                                             $560

           To Deferred revenue                                  $560

(Being cash is received)

b. For recording the cellular service sales:

Deferred revenue                             $336

           To Sales revenue                                         $336

(Being 12 months sales service is recorded)

c. For recording the cost of goods sold

Cost of goods sold                            $280

           To Inventory                                                 $280

(Being cost of goods sold is recorded)

d. For recording the deferred revenue

Deferred revenue ($336 ÷ 12)            $28

           To Service revenue                                      $28

(Being Deferred service revenue is recorded)

Working Note:-

Cellular service revenue = offer price ÷ total cost of phone and service × cellular service

= (($560 ÷ ($448 + $672)) × $672

= $336

learn more about journal entry here: https://brainly.com/question/24551976

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