a. Assume that, at the beginning of the fiscal year, a customer makes a volume purchase of 200 iPhones
signs a two‑year contract with Telstra for a voice and data package for each phone. The total
discounted sales price is $480 per phone, and Telstra pays Apple $640 for each iPhone. Telstra loses
money on the handset but makes it up by locking the customer into a long‑term service contract. This
contract includes free future software upgrades for two years. Because there is no reliable vendor‑
specific objective evidence, Telstra estimates a BESP of $64 for the future software upgrades. Allocate
the consideration received for the 200 units to each respective element in the arrangement, based on its
relative selling price (the sale is on account).
b. Use the financial statement effects template to record the original sale in part a., above, and the ac‑
counting adjustment at the end of the first fiscal year after the sale
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