Case 14-3 Coconut Telegraph Background on Coconut Telegraph Coconut Telegraph Corporation (Coconut) is a developer and provider of specialized customer billings and management software and systems. On February 1, 2012, Coconut had an arrangement with Buffet Worldwide Inc. (Buffet) to deliver the Volcano System and provide one year of post contract customer support (PCS). The PCS will start March 1, 2012. At the time of the arrangement, February 1, 2012, Buffet paid $12,000 for the Volcano System and the one year of PCS. On May 1, 2012 Coconut agreed to provide Buffet with training services on the customer management system and one additional year of PCS. This second arrangement was made under a separate contract and Buffet paid $4,500 …show more content…
The item or items have value on a standalone basis if any vendor sells them separately or the customer could resell the delivered item or items". Both the Volcano System and PCS have standalone relative selling price of $12,000 and $2,000 relatively and they could be purchased separately. Therefore, it is appropriate to account for the Volcano System and the PCS as separate units of accounting and use VSOE to determine the amount of revenue to be recognized. Relative fair value method VSOE % of relative fair value Allocated discount Allocated arrangement consideration System $12,000 85.71% $1,714 $10,286* PCS $2,000 14.29% $286 $1,714 Total $14,000 $2,000 $12,000 February 1, 2012 To record the payment received: Cash $12,000 Unearned Revenue $12,000 April 30, 2012 To record the delivery of Volcano System: Unearned Revenue $10,286* Revenue $10,286 3.) . Should the February 1, 2012, agreement and the May 1, 2012, agreement be accounted for separately or as a single arrangement? According to ASC 605-25-25-3, if the vendor and the buyer engage into separate contracts for the same entity at relatively close times, it is presumed to be negotiated as a
For and in consideration of Unit Two signing a this agreement subject to the following terms:
3. Should the February 1, 2012, agreement and the May 1, 2012, agreement be accounted for separately or as a single arrangement?
I have reviewed the agreement, however, under Submittals, Section Four (4), page 2, with questions.
Sparkle Company is a Nigerian diamond mining company. Sparkle is a joint venture, 50 percent owned by Shine and 50 percent owned by Brighten. Both Shine and Brighten are U.S.-based companies with their functional currency being the American dollar. Sparkle Companies functional currency is that of Nigeria, being the Naira. During 2009, Sparkle had several transactions with its joint venture owners and outside parties. The details of Sparkle’s transactions are three loans, three expenditures, and one revenue stream. The loans the company took out were $1 million from Brighten, $1 million from Shine, and 300 million Naira from a local Nigerian bank. The expenditures
• Contracts were exchanged on 2 May 2005 for the purchase of property for $2,130,000 between the plaintiffs and the first defendant.
The contract from February 1, 2012 and May 1, 2012 should be accounted together. According to ASC 985-605-55-4, “any of the following factors may indicate that a group of contracts should be accounted for as a single multiple-element arrangement: a. The contracts or agreements are negotiated or executed within a short timeframe of each other. B. The different elements are closely interrelated or interdependent in terms of design, technology, or function.” It is evident that the second contract is an extension of the first contract. It satisfies the first factor in which the training of the system is given within the same timeframe of the first year of PCS. It satisfies the second condition also. Without the first contract, the second contract would not exist. The second contract provides training based on the Volcano System
Case 12-02 To Recognize or Not to Recognize, That Is the Question Shakespeare Inc. (“Shakespeare” or the “Company”) is a privately held book printing and publishing company with a December 31 year-end. The summary balance sheet as of December 31, 2010, included: Current assets Noncurrent assets Total assets Current liabilities Noncurrent liabilities Total liabilities Total shareholder equity $ 6,500,000 28,250,000 $34,750,000 $ 4,500,000 13,750,000 $18,250,000 $16,500,000
a) Alan wants to know the five requirements in order to make a valid contract.
NOW, THEREFORE, in consideration of the mutual promises herein set forth and subject to the terms and conditions hereof, the parties agree as follows:
Enter the term of the agreement in number of months in section B. Please understand that the term of this agreement cannot exceed 12 months from the date of execution.
t. P1) An agreement cannot bind unless both parties to the agreement know what they are doing and freely choose to do it.
In this case module I was asked to watch a video lecture and to review learning activity number one. I was then asked to answer and discuss four different question; from a cultural perspective, is it unusual that Grandmother Marietta is the
The second requirement that needs to be fullled by the parties in the contract is the
Jules Kroll is planning to enter into the ratings industry. To determine whether it is a good idea and a good time for him to enter into the new business, we project the 5-year NPV for KBRA and apply SWOT analysis to KBRA. The 5-year projected NPV is $341.1 million, a positive number. It is a good time and a good idea for KBRA to enter the business. However, through our SWOT analysis, it would be difficult for KBRA to become competitive in a short time. Thus we suggest it add a credit rating division into the company to make attempts to it but not start up a
IN CONSIDERATION OF THE COVENANTS and agreements contained in this Sales Agreement the parties to this Agreement agree as follows: