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A cell phone company sells JPhone for $200 to customers who sign a two-year contract...

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Accounting

A cell phone company sells JPhone for $200 to customers who sign a two-year contract for cellular services at $60 per month. The regular stand-alone price of JPhone is $600.

Assume the company sold 1,000 packages on Jan 1, 2019. Determine the amount and timing of revenue the phone company should recognize over the two years.

Hint: first calculate the total revenue JPhone can generate over the two years, and then allocate the total to two partsphone and service, using the residual approach.

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