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18 March, 16:14

Sarjit Systems sold software to a customer for $293,000. As part of the contract, Sarjit promises to provide "free" technical support over the next six months. Sarjit sells the same software without technical support for $255,000 and a stand-alone six-month technical support contract for $45,000, so these products would sell for $300,000 if sold separately. Prepare Sarjit's journal entry to record the sale of the software. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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  1. 18 March, 17:11
    0
    Debit Cash:293000

    Credit Sales revenue:249050

    Credit deferred revenue: 43950

    Explanation:

    Received cash so u debit it

    credit sale of software, you need to get ratio of original amount and multiply by cash received

    255000/300000 x 293000 = 249050

    original amount of technical support multiply by cash received - deferred revenue because you will still be performing technical support for "free".

    45000/30000 x 293000 = 43950
  2. 18 March, 17:20
    0
    Dr Cash / Accounts Receivables $249,050

    Cr Revenue $249,050

    Explanation:

    The customer receives a discount for purchasing the bundle of goods because the sum of the stand-alone selling prices ($300,000) exceeds the promised consideration ($293,000). There is a discount of $7,0000

    This would be split between the two performance obligations as follows

    Technical support = $45,000/$300,000 X $7,000 = $1,050

    Software = $255,000/$300,000 X $7,000 = $5,950

    The software sale is $255,000 - $5,950 = $249,050
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