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Case Study 04-07 Lighthouse

In: Business and Management

Submitted By Nicole04
Words 4085
Pages 17
I. Succinct

The case present a company named Lighthouse that it business specializes as a provider of locating services for the shipping industry. The services comprise of a one-way messaging service that routes messages from the ships at sea to the shipping company’s offices. The messages provide the shipping company detailed information regarding to ship location, speed and current local weather.

The way the system works for gathering the ships data is, by installing a device as a dedicated hardware unit in the ships that serves as tracing device in which Lighthouse rendered the services, Lighthouse will connect the device to its service. Before the Ship Finder service can put in place the company required to customers sign two contracts, one for the sale of the devices and the other governing the provision of the service.

The service contracts generally have duration twelve months and are billed monthly, customer may terminate the services at any time but the amounts paid for the devices are nonrefundable.

The Lighthouse devices are made to be used exclusively with the Lighthouse services, the standard pricing for the Ship Finder Device are $10,000 per unit (MSRP) and for the Ship Finder Service are $300 a fixed monthly payments per unit. Payments for the devices are due upon completion of the installation and final acceptance by the customer.

The services are priced at standard rates although discounts are offered; depending on the number of devices sold also the company offered device discounts. Nevertheless, the discounts are based on the number of to be purchased and does not appear to be unreasonable.

II. Statement of the financial reporting issue or issues that is presented in the case.

The issue acknowledged in the presented case is based on the question of how the business, Lighthouse, should recognize revenue for sales of its…...

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