Baldi Piano manufactures customized pianos for concert halls. On July 1, 2021, Baldi signed a contract to deliver a concert piano for $150,000. Under the contract, Baldi is also obligated to provide a one-year maintenance service. If sold separately, the piano and the maintenance service would have cost $140,000 and $20,000, respectively. How much of the transaction price would be allocated to the piano and the maintenance service, assuming they are separate performance obligations? Record the journal entry pertaining to the contract on July 1, 2021 assuming that the piano is delivered on that date and the sale is on account.
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- On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?On January 1, 2020, Gordon Co. enters into a contract to sell a customer a wiring base and shelving unit that sits on the base in exchange for $3,000. The contract requires delivery of the base first but states that payment for the base will not be made until the shelving unit is delivered. Gordon identifies two performance obligations and allocates $1,200 of the transaction price to the wiring base and the remainder to the shelving unit. The cost of the wiring base is $700; the shelves have a cost of $320. Instructions a. Prepare the journal entry on January 1, 2020, for Gordon. b. Prepare the journal entry on February 5, 2020, for Gordon when the wiring base is delivered to the customer. c. Prepare the journal entry on February 25, 2020, for Gordon when the shelving unit is delivered to the customer and Gordon receives full payment.On January 1, 2025, Cullumber Co. enters into a contract to sell a customer a wiring base and shelving unit that sits on the base in exchange for $5,000. The contract requires delivery of the base first but states that payment for the base will not be made until the shelving unit is delivered. Cullumber identifies two performance obligations and allocates $1,750 of the transaction price to the wiring base and the remainder to the shelving unit. The cost of the wiring base is $850; the shelves have a cost of $490. (a) Prepare the journal entry on January 1, 2025, for Cullumber. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter O for the amounts. List debit entry before credit entry.) Date January 1, 2025 Account Titles and Explanation eTextbook and Media List of Accounts Debit Credit
- Jillian Inc. manufactures and installs customized equipment. On January 1, 2021, Jillian entered into a contract to sell equipment to a client for $800,000. This amount included installation. The company normally charges an additional fee for its installation services, but in this case, the installation was "bundled" with the equipment. The standalone value of the machinery was $750,000 while the cost of the installation was estimated at $100,000. Jillian had the equipment in its inventory on January 1, 2021. The equipment, which had a cost of $600,000, was customized (at no cost Jillan), and delivered to the client and installed on that date. Payment terms are as follows: January 1, 2021: $80,000 upon contract signing and delivery and installation. December 31, 2021; Balance due. Jillian Inc. follows IFRS and estimates that the interest rate for a similar financing arrangement would be 6%. Required: a. Apply the steps of IFRS 15 Revenue Recognition to this transaction. State each step…Beautiful Company sold a set of washing machine and a dryer for a total contract price of P100,000 on December 15, 2021. The stand-alone selling prices of the washing machine and the dryer if sold separately are: 150,000 and 70,000, respectively. The washing machine was delivered on December 20, 2021 but the dryer was delivered only on January 5, 2022. *How many performance obligations are there in the contract? *How much is the revenue to be recognized in 2021? *How much is the revenue to be recognized in 2022?Beautiful Company sold a set of washing machine and a dryer for a total contract price of P100,000 on December 15, 2021. The stand-alone selling prices of the washing machine and the dryer if sold separately are: 150,000 and 70,000, respectively. The washing machine was delivered on December 20, 2021 but the dryer was delivered only on January 5, 2022.1. How many performance obligations are there in the contract? 2. Use the same information in Number 5, how much is the revenue to be recognized in 2021? 3. Use the same information in Number 5, how much is the revenue to be recognized in 2022?
- Mott Company purchases a machine from Janelle Company. Installation of the machine requires specialized knowledge that Mott Company does not possess. Janelle Company regularly includes installation as part of its sales contracts. The machine has a stand-alone price of $50,000, and the value of the installation is estimated to be $5,000. Mott agrees to purchase the machine for $50,000. How much of the contract price should be allocated to the machine and installation respectively?Delta Spirit, Inc. entered into a contract to sell equipment to Wilco, LLC on October 1, 2021. Along with the equipment, Delta Spirit will provide one-year maintenance services on an as-needed basis, beginning once the equipment is installed. Delta Spirit offers similar services to other customers that purchased equipment sold by other vendors for $20,000. Delta Spirit will also provide installation services at no additional cost, a service that Delta Spirit typically charges $10,000. The equipment normally sells for $170,000 on its own. For the package deal, Wilco agrees to pay a total of $180,000. The equipment was delivered and installed on November 1, 2021. Wilco paid the entire invoice in cash on the delivery and installation date. How much revenue should Delta Spirit allocate to the various performance obligations in the above contract (round to the nearest dollar, if needed)?Sunshine offers a contract to Cape Country Club, which is comprised of 10 patio set plus installation for a price of $2,850 each. On a standalone basis, the patio sets sell for $2,400 (cost $1,410), and Sunshine estimates that the fair value of the installation service (based on cost-plus estimation) is $600. The contract was signed on March 21, 2024, and the Country Club paid the contract price in cash. The patio sets were installed on April 30, 2024. a) Describe the performance obligations. b) Show the calculations for the transaction price and allocation of the transaction price to the performance obligations. c) Prepare journal entries for Sunshine for March and April 2024. March 21 April 30
- ABCompany contracted with XYZ Corporation to construct custom-made equipment. The equipment was completed and ready for use on January 1, 2021. ABCompany paid for the machine by issuing a $200,000, three-year note that bears interest at the rate of 4% , payable annually on December 31 each year. Since the machine was custom-built, the cash price was unknown. However, when compared to similar contracts, 10% was deemed to be a reasonable rate of interest. Required: 1) Prepare the journal entry by ABCompany to record the purchase of equipment. 2) Prepare journal entries to record interest for each of the first two years.Marburg Manufacturing Company purchased a machine on January 2, 2021. The invoice price of the machine was P40,000, and the vendor offered a 2 percent discount for payment within ten days. The following additional costs were incurred in connection with the machine: Transportation-in Installation cost Testing costs prior to regular operation If the invoice is paid within the discount period, Marburg should record the acquisition cost of the machine at O P41,650. O P41,100. O P40,400. O P39,200. P1,200 700 550Denim, Inc. entered into a contract to sell equipment to Levi LLC. on October 1, 2021. Along with the equipment, Denim Inc. will provide one-year maintenance services on an as-needed basis, beginning once the equipment is installed. Denim offers similar services to other customers that purchased equipment sold by other vendors for $20,000. Denim Inc. will also provide installation services at no additional cost, a service that Denim Inc. typically charges $10,000. The equipment normally sells for $170,000 on its own. For the package deal, Levi LLC. agrees to pay a total of $180,000. The equipment was delivered and installed on November 1, 2021. Levi LLC. paid the entire invoice in cash on the delivery and installation date. How much revenue should Denim Inc. allocate to the various performance obligations in the above contract (round to the nearest dollar, if needed)? Prepare the Journal Entry for Denim Inc. to record the sale. Assume the equipment cost Denim Inc. $100,000 to…