Smarty Phones is a company that provides cellular phone sales and services. The company offers different packages
Question:
Smarty Phones is a company that provides cellular phone sales and services. The company offers different packages to suit different customers. For example, for one model of phone, the Raspberry 300, the company gives its customers the following options:
Option A: Raspberry 300 provided free with a three-year contract at $50 per month for cellular services. Option B: Raspberry 300 purchased at $400 with a one-year contract at $50 per month for cellular services. Option C: Raspberry 300 purchased for $600 with no contract.
Required: a. Determine the amount and timing of the revenue that Smarty Phones should recognize if a customer chooses Option A. Repeat for Options B and C. You may ignore the time value of money for this question. b. To ensure the validity of your approach in part (a), what else should you consider?
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a The phone packages involve multiple performance obligations so it is important to separate the two streams of revenue sale of the phone and cellular ...View the full answer
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Saikumar Ramagiri
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The time value of money (TVM) is the concept that the money you have in your pocket today is worth more than the same amount would be if you received it in the future because of the profit it can earn during the interim.
