Assume Apple sold the iPhone 3G for $500 (AT&T subsidy of $300 + retail price of $200), and the gross profit was $150 per unit (30%). The subscription accounting for the sale would be as follows: Q1 (quarter in which iPhone was sold to consumer): Dr. Cash Dr. COGS Dr. Deferred Costs under Subscription Accounting Subscription Accounting Cr. Revenue Dr. COGS Cr. Deferred Revenue under Subscription Accounting Q2 to Q8 (remaining quarters of iPhone's economic life): Dr. Deferred Revenue under Cr. Inventory Cr. Revenue Cr. Subscription Accounting Deferred Costs under 500 43.75 306.25 62.5 43.75 62.5 437.5 350 62.5 43.75