Fax Horizons, Inc. sells mobile phones, wireless plans, and service plan packages. Fax Horizons packages the following items for sale. Phone $199.00, Paid when customer purchases the phone. Wireless Plan per month, $40.00, Unlimited calling. Minimum coverage of 12-months. Paid monthly. Service Plan per month, $24.00, 12-month coverage. Paid when customer purchases the phone. Total When Purchased $263.00. a. Determine how and when the revenue is recognized.

Fax Horizons has determined that each item is a separate performance obligation. A customer purchases a new phone package on September 1. a. Explain how and when revenue is recognized. b. Prepare the journal entries for the month of September, assuming Fax Horizons makes adjusting entries on September 30.