DirectTV sells receivers and satellite dishes and provides satellite television programming to customers. DirectTV enters into...

  

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DirectTV sells receivers and satellite dishes and provides satellite television programming to customers. DirectTV enters into a transaction with Customer X (X) where X purchases a satellite dish and receiver and signs a contract to receive one year of satellite programming years (expected customer relationship period is three years). X installs the satellite dish and receiver itself. Amounts to be paid by X include a $50 upfront, nonrefundable fee and $18 per month for the duration of the contract (the $18 per month charges are legally enforceable). The costs incurred by DirectTV include: 1) $150 related to its purchase of the receiver and satellite dish from a third party. 2) $100 commission paid to an internal employee dedicated solely to selling activities. 1. Are any of the costs incurred by DirectTV deferrable and why? If so, over what period? 2. Perform the Realizability Test. DirectTV sells receivers and satellite dishes and provides satellite television programming to customers. DirectTV enters into a transaction with Customer X (X) where X purchases a satellite dish and receiver and signs a contract to receive one year of satellite programming years (expected customer relationship period is three years). X installs the satellite dish and receiver itself. Amounts to be paid by X include a $50 upfront, nonrefundable fee and $18 per month for the duration of the contract (the $18 per month charges are legally enforceable). The costs incurred by DirectTV include: 1) $150 related to its purchase of the receiver and satellite dish from a third party. 2) $100 commission paid to an internal employee dedicated solely to selling activities. 1. Are any of the costs incurred by DirectTV deferrable and why? If so, over what period? 2. Perform the Realizability Test.

Answer rating: 100% (QA)

1 It should be deferred as the cost incurred now gives revenue over the period of contract 2 ... View the full answer