Mead Agency sells insurance policy offered by American Life Insurance for a commission of $150 each policy beginning January 1, 2019. In addition, Mead Agency will receive an additional commission of $20 per policy each year as long as the policyholder does not cancel the policy. After selling the policy, Mead does not have any other performance obligation. Based on significant past experience, Mead estimates that policyholders on average continue to hold the policy (by renewing them) for at least 6 years. There is no evidence suggesting that the past behavior of policyholders will change in future.

Mead Agency has sold 250 policies on January 1, 2019.

1. Determine the transaction price of the revenue arrangement for Mead Agency.

2. Determine the amount of revenue that Mead should recognize in 2019.