Telecom Co. enters into a two-year contract with a customer to provide wireless service (voice and data) for $40 per month. To induce customers, Telecom Co. provides a free phone. Telecom Co. normally sells the phone on a stand-alone basis for $200. Telecom Co. also charges the customer a one-time activation fee of $35. Which of the following is true? A. The free phone constitutes a marketing expense. B. The activation fee is a separate performance obligation. C. There are two distinct performance obligations: the wireless service and the phone. D. There are two distinct performance obligations: the voice service and the data service.
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