Assume the facts as per Question 6 with the following additional costs:

There is a five euro cost to add a customer to the phone system and those who buy the phone outright do not default on payments for the phone or the service contract, but those who have a combined service contract default in 10% of the cases.

Required:

(a) Show the entries to record the transactions associated with the sale and supply for years one, two and three.

(b) Provide the disclosures which would need to be made in the annual report at the end of the first year of the contract.