Question

Seadrill Engineering sold software to oil-drilling firms. In addition to providing the software, the company also provides consulting services and support for 5 years to ensure smooth operation of the software. The total transaction price is $350,000. Based on standalone values, the company estimates the consulting services and support have a value of $150,000 and the software license has a value of $250,000. Seadrill generally records software sales using Sales Revenue account and consulting service using Service Revenue account. Assuming the performance obligations are not interdependent, the journal entry to record the transaction includes:A) a credit to sales revenue for $250,000 and a credit to unearned service revenue of $100,000.B) a credit to service revenue of $100,000.C) a credit to unearned service revenue of $100,000.D) a credit to sales revenue of $350,000.

Answer 1

Answer:

a credit to sales revenue for $250,000 and a credit to unearned service revenue of $150,000

Explanation:

The Journal entry is shown below:-

Cash Dr, $400,000

        To Sales revenue $250,000

       To unearned service revenue $150,000

(Being cash receipts is recorded)

The unearned revenue from service is the revenue in which the customer has paid the money, and the company does not provide the services. Acceptance of the money for the warranty which has been extended. The seller expects to continue to provide the services.The income will not be gained from this, because the company will not be reported until the company refuses to deliver the services in the future.

For recording this we debited the cash as it increased the assets and credited the sales revenue and unearned service revenue as it increased the revenue and liability

This is the answer but the same is not provided in the given options