Balance Sheet Income Statement Cash Noncash Assets Contra = Liabilities Assets + Contrib. Capital + Eamed Capital Revenues - Expenses Net Income
Suppose that CAB sold a “single commercial package” with a 3-year service contract for £50 million on January 1st, 2016 (equipment was delivered and the entire amount was collected in cash). The cost of the product (i.e. original equipment sold) was £22.5 million and the estimated cost of the 3-year service was £7.5 million. If sold separately, the equipment would sell for £25 million and the service contract for £30 million. Assume that the service is provided evenly over the 3-year service contract.
G1
REQUIRED: What is the impact of the sale of this “package” on the income statement and the balance sheet of CAB at the time of sale (i.e. on January 1st, 2016)? In other words, which balance is impacted and by how much. You can also use the financial statement effects template (FSET) to describe the impact. Please use the space provided below to answer these questions.
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