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Suppose that CAB sold a “single commercial package” with a 3-year service contract for £50 million on January 1st, 2016 (equipment was delivered and the entire amount was collected in cash). The cost of the product (i.e. original equipment sold) was £22.5 million and the estimated cost of the 3-year service was £7.5 million. If sold separately, the equipment would sell for £25 million and the service contract for £30 million. Assume that the service is provided evenly over the 3-year service contract.
G1
REQUIRED: What is the impact of the sale of this “package” on the income statement and the
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