Wireless Inc. is offering a special which gives a free iPhone when a two-year contract is signed.
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Question:
Wireless Inc. is offering a special which gives a free iPhone when a two-year contract is signed. The contract terms include: – One-time $50 non-refundable activation fee – Monthly $40 fee for ongoing cell service (standard monthly fee) – The phone costs Wireless $100 and they sell the phone separately (without a contract) for $120 – Wireless is not required to refund any fees
1. What are the separate elements in the contract?
2. What is the total amount of revenue to be recognized?
3. How should the revenue be allocated to the different elements?
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