QUESTION 35 Contract modifications — modification accounted for prospectively Serve Co enters into a three-year service contract with Customer for $ 450,000 ($ 150,000 per year). The standalone selling price for one year of service at inception of the contract is $ 150,000 per year. Serve Co accounts for the contract as a series of distinct services. At the end of the second year, the parties agree to modify the contract as follows: 1) the fee for the third year is reduced to $ 120,000; and 2) Customer agrees to extend the contract for another three years for $300,000 ($ 100,000 per year). The standalone selling price for one year of service at the time of modification is $ 120,000. How should Serve Co account for the modification?