Assume that TSA, Inc. entered into a five-year software arrangement on January 1, 1999, whereby the customer is contractually committed to make license payments of $100,000 on the contract date (ILF) and $2,000 at the end of each month during the license period (MLF). TSA's annual borrowing rate is estimated at 12 percent on January 1, 1999. Assume that all conditions for revenue recognition other than those specified havebeen met in the situations below.

In 1999, TSA determined that the monthly license fees for this contract satisfied the ''fixed and determinable'' provision of SOP 97-2. The license fee revenue recognized up-front is the initial payment plus the present value of MLF payments. The difference between the payments to be received from the customer and the amount of license fee revenue recognized is accounted for as interest revenue using the effective interest method.

1. Prepare TSA's journal entries to record the contract on January 1, 1999 and receipt of the first installment of $2,000 on January 31,1999.
2. TSA sold the future payment stream from this license arrangement for $65,000 on January 1, 2000 on a non- recourse basis. Prepare the journal entry to record this transaction assuming that the conditions for a sale are met.

1. While reviewing this contract in 2003, TSA determined that monthly license fees for this contract did not meet the ''fixed and determinable'' provision of SOP 97-2 in January 1999. Prepare the journal entries for TSA on January 1, 1999 and January 31, 1999 under this assumption. Explain your answer referring to ASC 985-605-25-35.
2. Now assume that the license pertains to software for financial transactions via the internet that is frequently updated because it is a potential target for hackers. The updates are essential in maintaining the utility of the software and are provided free of cost to the customer under the terms of the contract. Prepare the journal entries for TSA on January 1, 1999 and January 31, 1999 under this assumption. Explain your answer referring to ASC 606-10-55 (paras. 58, 59, 60, and 62) and ASC 606-10-55-140 ( paras. D and F).
3. Identify the total revenue recognized in each situation (a through c) above and how it is classified (i.e., under ILF, MLF, and Interest Revenue/Expense). How much revenue is booked in 1999 in each case? Provide reasons for differences in the timing of revenue recognition in the three situations, referring to relevant accounting standards.