For the following year, you are entering into a long-term contract - mugs for an event company
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Question:
For the following year, you are entering into a long-term contract - mugs for an event company for the next 3 years. They have several events planned and you will be their exclusive provider. In addition to the mugs, you will be part of the events by offering calligraphy on mugs sessions (do-it-yourself) as an event attraction. The total value of the contract is SAR 500,000, based only mugs. The workshop, if offered separately, would cost about SAR10,000 but is offered for free. It would be offered during an event in year 2.
Assume mugs are evenly sold over the three years. What revenue recognition do you predict of each of the three years, related to this contract?
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