Question

On July 1, 2014, Legoria Co. shipped software to a customer. Thearrangement with a customer also requires the company to providetechnical support over the next 12 month and to ship an expectedsoftware 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 thearrangements and the amounts for these “multiple Deliverables.”

2) Prepare the journal entry to record the cash receipt [ignorecost of goods sold].