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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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