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Seadrill Engineering licensed software to oil-drilling firms for 5 years. In addition to providing the...

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Accounting

Seadrill Engineering licensed software to oil-drilling firms for 5 years. In addition to providing the software, the company also provides consulting services and support to ensure smooth operation of the software. The total transaction price is $420,000. Based on standalone values, the company estimates the consulting services and support have a value of $120,000 and the software license has a value of $300,000. Assuming the performance obligations are not interdependent, the journal entry to record the transaction includes

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 a credit to Unearned Service Revenue of $120,000.

a credit to Sales Revenue of $420,000.

a credit to Service Revenue of $120,000.

a credit to Sales Revenue for $300,000 and a credit to Unearned Service Revenue of $120,000.

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