Group Project $-$ Case Analysis

Creative Systems Co$.("$Creative$")$ is a privately held corporation specializing in learning management systems solutions in the digital environment. Their proposed solutions, similar to Blackboard, for example, are implemented in small post$-$secondary education institutions across Canada. The company has been operating from its headquarters in Vancouver since January $2,2020.$ Creative financial statements are unaudited and prepared in accordance with ASPE.

Revenue

The selling price of Creative system solution is $\backslash (\backslash$$ $40,000\backslash )$ per educational institution over a $4-$year period. The price covers both, the access to a platform interface and the hardware $($such as workstation, projector, and printer$)$ at $\backslash$$$30,000$ and $\backslash$$$10,000$ respectively per client.

Additionally, Creative also provides customized software solutions to cater to the specific educational issues. Such customization will be an additional cost for the post$-$secondary institutions.

Creative prides itself in providing a one$-$stop system solution for their clients. As such, the company has partnered with Stellar Technologies Co$.($Stellar$)$ that provides the hardware to Creative' clients. Through this partnership, Stellar pays Creative a referral fee which is $\backslash (10\backslash \%\backslash )$ of hardware cost for every sale.

Since its inception, the company has recognized all its revenue at the time of sale upon receipt of a signed contract.

From the date the contract is signed, Creative takes an average of three $(3)$ months to establish functionality: from project implementation, hardware setup, to training.

At the end of $4$ years, there is an annual fee for the software license renewal which is $\backslash (\backslash$$ $1,500\backslash )$ per each contract sold to the post secondary education institution. The amount is automatically and fully recorded at the time when the software license expires.

Here are the annual historical revenues: