Reference no: EM133004522

Lion's Gate Electronics (LGE) sells tablet PCs combined with Internet service (Tablet Bundle A) that permits the tablet to connect to the Internet anywhere (that is, set up a WiFi hot spot). The price for the tablet and a four-year Internet connection service contract is $500. The stand-alone selling price of the tablet is $250 (cost to LGE $175). LGE sells the Internet access service independently for an upfront payment of $100, plus $72 payments due January 2, 2021, 2022, and 2023. With an imputed interest rate of 8%, the stand-alone value of the service is $286. On January 2, 2020, LGE signed 100 contracts, receiving a total of $31,445 in cash (full payment of $500 each in cash, less the present value of the note (contract) for the future service plan payments due January 2 each year), delivered the tablets, and started service for 100 tablet packages. LGE has a calendar year end and records adjusting entries at the end of the year.

Required

Problem a. Allocate the transaction price among the performance obligations of the contract. Round percentage allocations to two decimal places and final amounts to the nearest dollar. Assume IFRS is followed. Calculate the present value of the note receivable and prepare an instalment note receivable schedule for the term of the note. Round amounts to the nearest dollar.