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On January 1, 2019, BT&T Company enters into a 2-year contract with a customer for an unlimited talk and 10 GB data wireless plan for $70 per month. The contract includes a smartphone for which the customer pays $200. BT&T also sells the smartphone and monthly service plan separately, charging $700 for the smartphone and $65 for the monthly service for the unlimited talk and 10 GB data wireless plan.

Required:

a.	Determine the transaction price for each performance obligation, assuming that BT&T Company allocates the transaction price based on stand-alone prices.
b.	Record the initial journal entry for BT&T Companys sale of a 2-year contract on January 1, 2019, and the monthly journal entry.
c.	On January 1, 2020, the customer realizes that she needs less data in her wireless plan and downgrades to the unlimited talk and 2 GB data plan for the remaining term of the contract (12 months). The unlimited talk and 2 GB data plan is priced at $50 per month, which is the BT&T current stand-alone price for this plan that is available to all customers. Provide BT&Ts new monthly revenue recognition journal entry.

CHART OF ACCOUNTS
BT&T Company
General Ledger
ASSETS 111 Cash 121 Contract Receivable 141 Inventory 152 Prepaid Insurance 181 Equipment 198 Accumulated Depreciation LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Revenue 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings	REVENUE 411 Sales Revenue EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 512 Utilities Expense 521 Salaries Expense 532 Bad Debt Expense 540 Interest Expense 541 Depreciation Expense 559 Miscellaneous Expense 910 Income Tax Expense

b. Record the initial journal entry for BT&T Companys sale of a 2-year contract on January 1, 2019, and the monthly journal entry on January 31.

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6

c. On January 1, 2020, the customer realizes that she needs less data in her wireless plan and downgrades to the unlimited talk and 2 GB data plan for the remaining term of the contract (12 months). The unlimited talk and 2 GB data plan is priced at $50 per month, which is the BT&T current stand-alone price for this plan that is available to all customers. Provide BT&Ts new monthly revenue recognition journal entry on January 31.

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3

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