PhreeWire Phones offers a number of plans to its mobile telephone customers

PhreeWire Phones offers a number of plans to its mobile telephone customers. For example, a customer can receive a free phone when signing a 3-year contract for airtime and data that requires a monthly payment of $80. Alternately, the customer could pay $300 for the telephone when signing a 2-year contract requiring monthly payments of $100.

Required: Determine the amount of revenue to be recognized each year under the two different scenarios. Assume that the fair value of the telephone is $500 and the fair value of the airtime and data is $1,300 per year.