Sky Communications (SKY) usually sells a cell phone for $448 plus 12 months of cellular service for $672. SKY has a special, time-limited offer in which it gives the phone for free and sells the 12 months of cellular service for $560. Each phone costs SKY $280, which it accounts for in its perpetual inventory system. On July 1, SKY sells one of the special packages, delivers the phone, collects the $560 cash, and starts the cellular service.
What journal entries would SKY record on July 1 and July 31?
a. Record receipt of cash.
b. Record the sales of cellular service for 12 months.
c. Record the cost of goods sold.
d. Record the deferred revenue.
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