On February 1 2017 Silicon Rentals contracts with Zurgg Technology
On February 1, 2017, Silicon Rentals contracts with Zurgg Technology to provide 6 months of office services in exchange for 18,000 shares of Zurgg’s common stock. The contract is signed on that date and works starts immediately. Silicon appropriately determines that its performance obligation is satisfied over time and each month it receives 3,000 shares of Zurgg Technology common stock. The fair value of Zurgg’s common stock at February 28, 2017, and March 31, 2017, is $ 40 and $ 31, respectively.
Required:
1. Prepare Silicon’s journal entries related to recognize service revenue for February and March.
2. Assume that Silicon could not estimate the fair value of Zurrgg’s common stock. How would Silicon determine fair value?
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