Peachpit Software Developers Shipped Its Accounting Package to a Customer

Essay

Peachpit Software Developers shipped its accounting package to a customer on September 10,2014.In addition to the software,Peachpit's contract requires the company to provide: (1)training to the customer's accounting staff during October of 2014 and again in January 2015 when the upgrade is released-75% of the training hours are provided during October,(2)technical product support for one year starting October 1,2014,and (3)a major upgrade to the software early in 2015.The customer paid the total contract price of $80,000 upon receipt of the invoice on September 17,2014.Peachpit would charge the following if these individual contract elements were sold separately:
$$\begin{array} { l r } & \text { Fair Value } \\\text { Accounting package (software) } & \$ 65,000 \\\text { Training customer's staff } & 10,000 \\\text { Customer support } & 15,000 \\\text { Accounting software upgrade } & 10,000 \\\quad \text { Totals } & \$ 100,000\end{array}$$
Required:
a.Prepare a journal entry to record receipt of the cash payment.
b.Determine the amount of revenue to be recognized in 2014 and prepare the necessary journal entry.