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For the case below, (a) determine which cost can be capitalized and deferred (8pts), (b) perform the realizability test (show calculation) (5pts). International TV Company
For the case below, (a) determine which cost can be capitalized and deferred (8pts), (b) perform the realizability test (show calculation) (5pts). International TV Company (TV) sells programing box with international television programming to customers. iTV enters into a transaction with Customer M (M) where M purchases a programing box and signs a contract to receive one year of programming service. Minstalls the programming box itself. Amounts to be paid by M include a $100 upfront, nonrefundable fee and $20 per month for the duration of the contract. If the customer cancels the contract early, a $200 cancellation fee is due iTV. The costs incurred by iTV include: $100 related to its purchase of the programming box from a third party $15 of origination costs paid to an agency to perform credit check $25 of setup costs paid to an installation company $100 commission paid to an internal employee dedicated solely to selling activities
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