revenue recognition at time of sale assume that lentiva group 264240

Revenue recognition at time of sale. Assume that Lentiva Group Limited provided the following description of its revenue recognition practices in the notes to its 2007 financial statements.

?c 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, collectability is reasonably assured, and deliver has occurred.

?c 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, 2008, Lentivu sold 50,000 laptop computers to the New York City public education 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. Sold separately, the price of the training services is $100 per laptop, and the 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, 2008?

(b) December 31, 2008?

(c) December 31, 2009?