Marvel System Services Provides Its Customers with Computer-Based Services Over

question 62

Essay

Marvel System Services provides its customers with computer-based services over an extended period. Customers are required to prepay the entire fee for the extended service. Marvel performs initial setup activities to enter a customer into its system. The initial setup allows the customer to receive automated services from Marvel from that point forward in the service agreement.
The management of Marvel plans to recognize the revenue over the life of the service contract, but plans to recognize a disproportionate amount of revenue at the beginning of the contract as a result of the completion of the setup activities and the cost incurred in connection with the completion of the setup activities.
Required:
Do you agree with the proposal by the management of Marvel regarding revenue recognition related to the setup activities? How should revenue be recognized for an agreement such as this?

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Definitions:

Consensus

An agreement or alignment of opinions among members of a group.

Improved Acceptance

Enhanced approval or agreement with an idea, product, or change by a wider audience.

Effective Teams

Groups of individuals working collaboratively towards a common goal, characterized by clear communication, mutual support, and strong coordination.

Clear Sense

The ability to understand or interpret something in a way that is free from doubt or ambiguity.