Sullivan Software Sells Packages of a Software Program and One

Sullivan Software sells packages of a software program and one year's worth of technical support for $500. Its packaging lists the $500 sales price as comprised of a software program at a price of $450 and technical support with a price of $100, with a $50 discount for the package deal. All of Sullivan's sales are for cash, and there are no returns. Sullivan sells the software program separately for $475 and offers a year of technical support separately for $75.
-Sullivan should recognize revenue for the two parts of the arrangement as follows:

A) Recognize the entire $500 when the customer pays cash to buy the package.
B) Recognize the portion of the $500 attributable to the software program when the customer pays cash to buy the package; defer the portion attributable to technical support and recognize over the support period.
C) Defer the entire $500 and recognize over the support period.
D) Recognize the entire $500 upon conclusion of the support period.

Correct Answer:

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