Reference no: EM132654636
Question - Please provide solutions and explanations
On January 1, 2018, PLDC enters into a wireless contract in which customer MBP is provided with handset and a voice and data plan for P 3,500 per month. PLDC identified the handset and wireless plan as separate performance obligations.
The handset can be separately sold by PLDC for a price of 20,000 which provides observable evidence of stand-alone selling price. PLDC offers a 12-month service plan without a phone that includes the same level of services for a price of P 2,500 per month.
1. How much is the total transaction price to be allocated to the separate performance obligation?
a. P 20,000
b. P 30,000
c. P 42,000
d. P 50,000
2. How much of the transaction price is to be allocated to the wireless plan?
a. P 16,800
b. P 22,000
c. P 25,200
d. P 30,000
3. How much of the transaction price is to be allocated to the handset?
a. P 16,800
b. P 20,000
c. P 22,000
d. P 25,200
4. On January 1, 2018, what is the entry at the inception of the contract?
a. Receivable 42,000
Revenue 42,000
b. Receivable 42,000
Equipment Revenue 16,800
Service Revenue 25,200
c. Contract Asset 16,800
Equipment Revenue 16,800
d. Receivable 25,200
Contract Asset 16,800
Equipment Revenue 16,800
Service Revenue 25,200
5. On January 31, 2018, what is the entry to record the monthly billing of monthly fee?
a. Receivable 3,500
Revenue 3,500
b. Receivable 3,500
Equipment Revenue 1,400
Service Revenue 2,100
c. Receivable 3,500
Service Revenue 2,100
Contract Asset 1,400
d. Cash 3,500
Receivable 3,500