To: Dr . John M. Morris, Office of Accounting
From: Group # five (Amanda Picht, Qinxi Lover, Mengnan Zhang)
Date: Apr 10, 2012
Subject: Acctg 642: Circumstance 09-1, Speed Cellular
Statement of Facts
Velocity Cell Services is a company that offers wireless services and products based on a global System for Mobile Marketing and sales communications (GSM) regular. Under the GSM standard, an activation card is necessary for every subscriber. The corporation is advertising Power Starterpack, a prepaid phone service plan to existing wireless subscribers. Every subscriber of the plan will receive a new service card and a non-refundable prepaid fee of one-hundred dollar. The $200 prepaid coupon includes 50 dollars worth of minutes within 360 days and nights and a brand new activation greeting card. Consumers have got additional benefits such as Wireless, additional memory space, and international call capabilities. Consumers may also buy the account activation card and extra functionalities individually.
Identification of Questions & Alternatives
The following questions and alternatives have already been identified according to disclosure of each of the expected insurance recoveries: 1 . How should Velocity Cellular identify revenue pertaining to the Power Starterpack? Should the deliverable items be recognized individually or being a single item on the monetary statements? 2 . How will need to fees become allocated about financial assertions?
Conclusions and Authoritative Reasoning
1 . Speed Cellular will need to recognize earnings for the activation greeting card and the cellphone service (airtime) separately. A. ASC 605-25-05-2 describes conditions under which multiple deliverables may come up, multiple products may be delivered, performance may possibly occur by different occasions or over several periods of time, plus the customer's obligations for these gifts may be fixed, variable, or possibly a combination of set and adjustable. B. ASC 605-25-25-5 claims that in an...
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