E6-7: LO6-1: Determining Revenue from a Bundled Sale

Assume that Verizon normally sells a Samsung S9 phone for $480 and charges $60 per month for a one-year cell service contract. Assume further that on January 1, Verizon offered a special package price combining the phone and the one-year service contract for $75 per month. Required:

1. Identify the contract between the company and the customer

2. Identify the performance obligations (components of the bundled sale).

3. Determine the transaction price.

4. Allocate the transaction price to the performance obligations proportionately based on the normal retail prices of the performance obligations.

5. Determine the amount of revenue that should be recorded related to the bundled sale in the first quarter (January 1 to March 31).