On January 1, 2017, Loud Company enters into a 2 year contract with a customer for an unlimited talk and 5 GB data wireless plan for $ 65 per month. The contract includes a smartphone for which the customer pays $ 299. Loud also sells the smartphone and monthly service plan separately, charging $ 649 for the smartphone and $ 65 for the monthly service for the unlimited talk and 5 GB data wireless plan.
Required:
1. Calculate the transaction price for the smartphone and unlimited talk and 5 GB data wireless plan assuming that Loud allocates consideration based on stand alone prices.
2. Record the initial journal entry for Loud Company’s sale of a 2 year contract on January 1, 2017, and the monthly journal entry.