Intermediate Accounting, 10 Ed
10th Edition
ISBN: 9781260310177
Author: Mark W. Nelson, Wayne B. Thomas J. David Spiceland
Publisher: McGraw-Hill Education
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Chapter 6, Problem 6.4BE
Allocating the transaction price
• LO5–4
Sarjit Systems sold software to a customer for $80,000. As part of the contract, Sarjit promises to provide “free” technical support over the next six months. Sarjit sells the same software without technical support for $70,000 and a stand-alone six month technical support contract for $30,000, so these products would sell for $100,000 if sold separately. Prepare Sarjit’s
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Problem 18-01 (Part Level Submission)
Waterway Company sells tablet PCs combined with Internet service, which permits the tablet to connect to the Internet anywhere and set up a Wi-Fi hot spot. It offers two bundles with the following terms.
1.
Waterway Bundle A sells a tablet with 3 years of Internet service. The price for the tablet and a 3-year Internet connection service contract is $505. The standalone selling price of the tablet is $263 (the cost to Waterway Company is $160). Waterway Company sells the Internet access service independently for an upfront payment of $296. On January 2, 2020, Waterway Company signed 100 contracts, receiving a total of $50,500 in cash.
2.
Waterway Bundle B includes the tablet and Internet service plus a service plan for the tablet PC (for any repairs or upgrades to the tablet or the Internet connections) during the 3-year contract period. That product bundle sells for $607. Waterway Company provides the 3-year tablet service plan as a…
HW #10 (continued)
JK7 [7 pts] For the satellite contract described in the in-class
exercise, the build plan and spending profile is shown below.
- The contract calls for the following payment profile from the customer
• Payments = 80% of company expenditures in each year, with an additional
milestone payment of $100M in the year that each satellite is completed
• Create a spreadsheet to model the full 10-year program and use it to (a)
annual cash flow (b) IRR for the full 7-satellite, 10-year program
1
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10
S1
10%
30%
40%
20%
S2
30%
50%
20%
S3
30%
50%
20%
S4
30%
50%
20%
S5
30%
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30%
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Problem 6-2 (Algo) Performance obligations; warranties; option [LO6-2, 6-4, 6-5]
Creative Computing sells a tablet computer called the Protab. The $890 sales price of a Protab Package includes the following:
• One Protab computer.
• A 6-month limited warranty. This warranty guarantees that Creative will cover any costs that arise due to repairs or replacements
associated with defective products for up to six months.
• A coupon to purchase a Creative Probook e-book reader for $145, a price that represents a 50% discount from the regular Probook
price of $290. It is expected that 25% of the discount coupons will be utilized.
• A coupon to purchase a one-year extended warranty for $65. Customers can buy the extended warranty for $65 at other times as
well. Creative estimates that 35% of customers will purchase an extended warranty.
• Creative does not sell the Protab without the limited warranty, option to purchase a Probook, and the option to purchase an
extended warranty, but estimates…
Chapter 6 Solutions
Intermediate Accounting, 10 Ed
Ch. 6 - What are the five key steps a company follows to...Ch. 6 - What indicators suggest that a performance...Ch. 6 - What criteria determine whether a company can...Ch. 6 - We recognize service revenue either at one point...Ch. 6 - What characteristics make a good or service a...Ch. 6 - Prob. 6.6QCh. 6 - What must a contract include for the contract to...Ch. 6 - How might the definition of probable affect...Ch. 6 - When a contract includes an option to buy...Ch. 6 - Prob. 6.10Q
Ch. 6 - Prob. 6.11QCh. 6 - Is a customers right to return merchandise a...Ch. 6 - Prob. 6.13QCh. 6 - Under what circumstances should sellers consider...Ch. 6 - When should a seller view a payment to its...Ch. 6 - What are three methods for estimating stand-alone...Ch. 6 - When is revenue recognized with respect to...Ch. 6 - In a franchise arrangement, what are a franchisors...Ch. 6 - When does a company typically recognize revenue...Ch. 6 - Prob. 6.20QCh. 6 - Prob. 6.21QCh. 6 - Prob. 6.22QCh. 6 - Must bad debt expense be reported on its own line...Ch. 6 - Explain the difference between contract assets,...Ch. 6 - Explain how to account for revenue on a long-term...Ch. 6 - Prob. 6.26QCh. 6 - Prob. 6.27QCh. 6 - Timing of revenue recognition LO53 Estate...Ch. 6 - Allocating the transaction price LO54 Sarjit...Ch. 6 - Existence of a contract LO5-5 Tulane Tires wrote...Ch. 6 - Prob. 6.6BECh. 6 - Prob. 6.7BECh. 6 - Performance obligations; warranties LO55 Vroom...Ch. 6 - Prob. 6.9BECh. 6 - Prob. 6.10BECh. 6 - Variable consideration LO56 Leo Consulting enters...Ch. 6 - Prob. 6.16BECh. 6 - Prob. 6.17BECh. 6 - Prob. 6.18BECh. 6 - Prob. 6.19BECh. 6 - Prob. 6.20BECh. 6 - Prob. 6.21BECh. 6 - Estimating stand-alone selling prices: expected...Ch. 6 - Estimating stand-alone selling prices; residual...Ch. 6 - Prob. 6.24BECh. 6 - Prob. 6.25BECh. 6 - Contract assets and contract liabilities LO58...Ch. 6 - Long-term contract; revenue recognition over time;...Ch. 6 - Prob. 6.34BECh. 6 - Long-term contract; revenue recognition upon...Ch. 6 - Long-term contract; revenue recognition; loss on...Ch. 6 - Prob. 6.1ECh. 6 - Allocating transaction price LO54 Video Planet...Ch. 6 - Prob. 6.4ECh. 6 - Prob. 6.6ECh. 6 - Prob. 6.7ECh. 6 - Prob. 6.9ECh. 6 - Variable considerationmost likely amount; change...Ch. 6 - Variable considerationexpected value; change in...Ch. 6 - Prob. 6.12ECh. 6 - Prob. 6.13ECh. 6 - Prob. 6.14ECh. 6 - Approaches for estimating stand-alone selling...Ch. 6 - FASB codification research LO56, LO57 Access the...Ch. 6 - FASB codification research LO58 Access the FASB...Ch. 6 - Long-term contract; revenue recognition over time;...Ch. 6 - Prob. 6.1PCh. 6 - Prob. 6.2PCh. 6 - Prob. 6.3PCh. 6 - Prob. 6.5PCh. 6 - Variable consideration; change of estimate LO53,...Ch. 6 - Prob. 6.7PCh. 6 - Prob. 6.8PCh. 6 - Prob. 6.10PCh. 6 - Long-term contract; revenue recognition over time...Ch. 6 - Prob. 6.1DMPCh. 6 - Judgment Case 52 Satisfaction of performance...Ch. 6 - Judgment Case 53 Satisfaction of performance...Ch. 6 - Prob. 6.5DMPCh. 6 - Prob. 6.7DMPCh. 6 - Prob. 6.9DMPCh. 6 - Prob. 6.10DMPCh. 6 - Prob. 6.12DMPCh. 6 - Prob. 6.13DMPCh. 6 - Prob. 6.14DMPCh. 6 - Prob. 6.15DMPCh. 6 - Prob. 1CCTC
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