Wildhorse Company manufactures products ranging from simple automated machinery to complex systems containing nume components. Unit selling prices range from $200,000 to $1,500,000 and are quoted inclusive of installation. The installation does not involve changes to the features of the equipment and does not require proprietary information about the equipmen for the installed equipment to perform to specifications. Wildhorse has the following arrangement with Sheffield Inc. • Sheffield purchases equipment from Wildhorse for a price of $930,600 and contracts with Wildhorse to install the equipment. Wildhorse charges the same price for the equipment irrespective of whether it does the installation or not market data, Wildhorse determines installation service is estimated to have a standalone selling price of $59,400. The the equipment is $600,000. Sheffield is obligated to pay Wildhorse the $930,600 upon the delivery of the equipment. Wildhorse delivers the equipment on June 1, 2025, and completes the installation of the equipment on September 30, 2025. T equipment has a useful life of 10 years. Assume that the equipment and the installation are two distinct performance obligatio which should be accounted for separately.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Wildhorse Company manufactures products ranging from simple automated machinery to complex systems containing numerous
components. Unit selling prices range from $200,000 to $1,500,000 and are quoted inclusive of installation. The installation process
does not involve changes to the features of the equipment and does not require proprietary information about the equipment in order
for the installed equipment to perform to specifications. Wildhorse has the following arrangement with Sheffield Inc.
Sheffield purchases equipment from Wildhorse for a price of $930,600 and contracts with Wildhorse to install the
equipment. Wildhorse charges the same price for the equipment irrespective of whether it does the installation or not. Using
market data, Wildhorse determines installation service is estimated to have a standalone selling price of $59,400. The cost of
the equipment is $600,000.
Sheffield is obligated to pay Wildhorse the $930,600 upon the delivery of the equipment.
Wildhorse delivers the equipment on June 1, 2025, and completes the installation of the equipment on September 30, 2025. The
equipment has a useful life of 10 years. Assume that the equipment and the installation are two distinct performance obligations
which should be accounted for separately.
(a)
How should the transaction price of $930,600 be allocated among the performance obligations? (Do not round intermediate
calculations. Round final answers to O decimal places, e.g. 5,275.)
Equipment $
Installation $
Transcribed Image Text:Wildhorse Company manufactures products ranging from simple automated machinery to complex systems containing numerous components. Unit selling prices range from $200,000 to $1,500,000 and are quoted inclusive of installation. The installation process does not involve changes to the features of the equipment and does not require proprietary information about the equipment in order for the installed equipment to perform to specifications. Wildhorse has the following arrangement with Sheffield Inc. Sheffield purchases equipment from Wildhorse for a price of $930,600 and contracts with Wildhorse to install the equipment. Wildhorse charges the same price for the equipment irrespective of whether it does the installation or not. Using market data, Wildhorse determines installation service is estimated to have a standalone selling price of $59,400. The cost of the equipment is $600,000. Sheffield is obligated to pay Wildhorse the $930,600 upon the delivery of the equipment. Wildhorse delivers the equipment on June 1, 2025, and completes the installation of the equipment on September 30, 2025. The equipment has a useful life of 10 years. Assume that the equipment and the installation are two distinct performance obligations which should be accounted for separately. (a) How should the transaction price of $930,600 be allocated among the performance obligations? (Do not round intermediate calculations. Round final answers to O decimal places, e.g. 5,275.) Equipment $ Installation $
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