The Company sells the majority of its devices in the U.S. through retailers and distributors as...
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The Company sells the majority of its devices in the U.S. through retailers and distributors as well as through the Company's website. Devices revenue primarily consists of hardware, embedded software, and unspecified upgrades and updates on a when and if-available basis. The hardware and embedded software are considered as one performance obligation and revenue is recognized at a point in time when the control transfers to the customer. Unspecified upgrades and updates are available to customers on a when-and-if available basis. The Company records the allocated value of the unspecified upgrades and updates as deferred revenue and recognizes it as devices revenue ratably on a time elapsed basis over the estimated economic life of the associated products. Suppose a ROKU device sells for $50. Of that amount, the 'unspecified upgrades and updates,' are valued at about $10. The ROKU device costs ROKU $30 to manufacture. Here is a balance sheet with a single ROKU device in inventory that cost ROKU $30 to purchase from their manufacturing vendor: Statement of Financial Position Cash Inventory $30 Total Assets $30 Liabilities Common stock Retained earnings Total Shareholders Equity $0 $15 $15 $30 Required: 1. Provide the journal entry for the sale of the ROKU unit for cash. No upgrades or updates are performed for the customer this period. 2. Provide the balance sheet after the sale of the ROKU unit. 3. Provide the income statement for the period of the sale of the ROKU unit. The Company sells the majority of its devices in the U.S. through retailers and distributors as well as through the Company's website. Devices revenue primarily consists of hardware, embedded software, and unspecified upgrades and updates on a when and if-available basis. The hardware and embedded software are considered as one performance obligation and revenue is recognized at a point in time when the control transfers to the customer. Unspecified upgrades and updates are available to customers on a when-and-if available basis. The Company records the allocated value of the unspecified upgrades and updates as deferred revenue and recognizes it as devices revenue ratably on a time elapsed basis over the estimated economic life of the associated products. Suppose a ROKU device sells for $50. Of that amount, the 'unspecified upgrades and updates,' are valued at about $10. The ROKU device costs ROKU $30 to manufacture. Here is a balance sheet with a single ROKU device in inventory that cost ROKU $30 to purchase from their manufacturing vendor: Statement of Financial Position Cash Inventory $30 Total Assets $30 Liabilities Common stock Retained earnings Total Shareholders Equity $0 $15 $15 $30 Required: 1. Provide the journal entry for the sale of the ROKU unit for cash. No upgrades or updates are performed for the customer this period. 2. Provide the balance sheet after the sale of the ROKU unit. 3. Provide the income statement for the period of the sale of the ROKU unit.
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a The journal entry for the sale of the ROKU unit for cash with no upgrades or updates performed for the customer in this period would be Cash 50 Reve... View the full answer
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Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
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