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(Solved) 19. Revenue recognition at time of sale. Assume that Lentiva Group Limited provided the fol-...


19.   Revenue recognition at time of sale. Assume that Lentiva Group Limited provided the fol- lowing description of its revenue recognition policies in the notes to its financial statements. ■     Lentiva recognizes revenue from the sale of goods (such as sales of hardware and software) when it effectively transfers both ownership and risk of loss to the customer, generally when there is persuasive evidence a sales arrangement exists, the price is fixed or determinable, collectibility is reasonably assured, and delivery has  occurred. ■     Lentiva defers revenue from contracts to provide training services and amortizes those amounts as earned over the contract period, generally three   years. Assume that on January 1, 2013, Lentiva sold 50,000 laptop computers to a public educa- tion system for $75 million. The price of the computers includes a contract for training services, which Lentiva will provide evenly over the next two years. The separate selling price of the training services is $100 per laptop, and the separate selling price of a laptop is $1,500. Lentiva’s cost of a laptop is $1,200, and the expected cost to provide the training is $50 per laptop. At the time of sale, the customer paid Lentiva $15 million, and promised to pay the remaining amount owed in 30 days. Assuming that the arrangement meets the first criterion to recognize revenue, what journal entries will Lentiva make on these dates: a.   January 1, 2013? b.   December 31, 2013? c.    December 31, 2014?  

 


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