CPA · Question 27 · Area II: Technical Accounting
A software company sells a license for its software along with a 1-year technical support contract. The software is functional without the support, but the support is critical for updates and security. The customer can use the software immediately. <br/><br/>How should the revenue be recognized?
Answer options:
Recognize all revenue at the point of sale.
Recognize all revenue ratably over the 1-year period.
Allocate the transaction price between the license and the support. Recognize license revenue at the point of sale and support revenue over the 1-year period.
Recognize revenue when the support contract expires.
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