Use appropriate citations where relevant and according to your professional judgment. For questions requiring use of the codification, please use the following style:

Cite the ASC down to the paragraph. For example, $($ASC $330-10-05-01)$

Copy$-$paste in quotation mark, the paragraph you cite from the codification into the word document.

Interpret the codification paragraph into $$plain English$$ as best you can. In other words, how would you explain the appropriate accounting treatment to a colleague, boss, or business partner who has a basic understanding of accounting? You may $($and are encouraged to$)$ use debits and credits or $$T$-$accounts$$ to illustrate the accounting if appropriate.

Luxury Timepieces Inc., renowned for crafting high$-$end watches and offering an industry$-$leading lifetime warranty, is contemplating a new approach for its burgeoning budget$-$friendly collection. Unlike its premium products, whose warranty costs are absorbed within the sales price, Luxury Timepieces Inc. is considering the option of a purchasable service contract for after$-$sales repairs and maintenance in collaboration with an external service provider. How should Luxury Timepieces Inc. reflect this potential third$-$party service contract arrangement in its financial accounting?

$($a$)$ Identify the accounting standards that addresses the accounting for the type of separately priced warranty that Luxury Timepieces Inc. is considering.

$($b$)$ When are warranty contracts considered separately priced?

$($c$)$ What are incremental direct acquisition costs and how should they be treated?