Question

Seadrill Engineering licensed software to oil-drilling firms for 5 years. In addition to providing the software, the company also provides consulting services and support to ensure smooth operation of the software. The total transaction price is $420,000. Based on standalone values, the company estimates the consulting services and support have a value of $120,000 and the software license has a value of $300,000. Assuming the performance obligations are not interdependent, the journal entry to record the transaction includesa. 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

The answer is: I believe the question was not copied correctly since the numbers don't match.

The recorded transactions should be:

• Dr Cash 420,000
• Cr Sales Revenue of 300,000
• Cr Unearned Service Revenue of 120,000

Cash account should be debited, since it's an asset. Sales revenue should be credited since it increases equity.Unearned revenue is a type of liability, so it should be credited.