Danielle Madison owns a store called Mountainside Appliances Ltd. that sells several different brands of refrigerators, stoves, dishwashers, washers, and dryers. Each of the appliances comes with a factory warranty on parts and labour that is usually one to three years. For an additional charge, Danielle offers customers more extended warranties. These extended warranties come into effect after the manufacturers’ warranties end.
Using the revenue recognition criteria, discuss how Danielle should account for the revenue from the extended warranties.