CONTRACT MODIFICATION TUCSON FINANCIAL SERVICES PERFORMS BOOK KEEPING AND TAX REPORTING SERVICES TO START UP COMPANIES IN THE OCONOMOWOC ARE. ON JANUARY 1, 2015 TUCSON ENTERED IN A 3 YEAR SERVICE CONTRACT WITH WIGO TECH. WIGO PROMISES TO PAY P20, 000 AT THE BEGINNING OF EACH YEAR. WHICH AT CONTRACT INCEPTION IS THE STANDALONE SELLING PRICE FOR THESE SERVICES. AT THE END OF SECOND YEAR, THECONTRACT IS MODIFIED AND THE FEE FOR THE THIRD YEAR OF SERVICES IS REDUCED TO 16, 000. IN ADDITION, WIGO AGREES TO PAY AN ADDITIONAL P40, 000 AT THE BEGINNING OF THE THIRD YEAR TO COVER THE CONTRACT FOR 3 ADDITIONAL YEARS (I.E 4 YEARS REMAIN AFTER THE MODIFICATION). THE EXTENDED CONTRACT SERVICES ARE SIMILAR TO THOSE PROVIDED IN THE FIRST 2 YEARS OF THE CONTRACT. REQUIRED: PREPARE THE JOURNAL ENTRIES FOR TUCSON IN 2015 AND 2016 RELATED TO THIS SERVICE CONTRACT. PREPARE THE JOURNAL ENTRIES FOR TUCSON IN 2017 RELATED TO THE MODIFIED SERVICE CONTRACT, ASSUMING PROSPECTIVE APPROACH. REPEAT THE REQUIREMENTS FOR NO. 2ASSUMING TUCSON AND WIGO AGREE ON A REVISED SET OF SERVICES (FEWER BOOKKEEPING SERVICES BUT MORE TAX SERVICES) IN THE EXTENDED CONTRACT PERIOD AND THE MODIFICATION RESULTS IN A SEPARATE PERFORMANCE OBLIGATION.
CONTRACT MODIFICATION TUCSON FINANCIAL SERVICES PERFORMS BOOK KEEPING AND TAX REPORTING SERVICES TO START UP COMPANIES IN THE OCONOMOWOC ARE. ON JANUARY 1, 2015 TUCSON ENTERED IN A 3 YEAR SERVICE CONTRACT WITH WIGO TECH. WIGO PROMISES TO PAY P20, 000 AT THE BEGINNING OF EACH YEAR. WHICH AT CONTRACT INCEPTION IS THE STANDALONE SELLING PRICE FOR THESE SERVICES. AT THE END OF SECOND YEAR, THECONTRACT IS MODIFIED AND THE FEE FOR THE THIRD YEAR OF SERVICES IS REDUCED TO 16, 000. IN ADDITION, WIGO AGREES TO PAY AN ADDITIONAL P40, 000 AT THE BEGINNING OF THE THIRD YEAR TO COVER THE CONTRACT FOR 3 ADDITIONAL YEARS (I.E 4 YEARS REMAIN AFTER THE MODIFICATION). THE EXTENDED CONTRACT SERVICES ARE SIMILAR TO THOSE PROVIDED IN THE FIRST 2 YEARS OF THE CONTRACT. REQUIRED: PREPARE THE JOURNAL ENTRIES FOR TUCSON IN 2015 AND 2016 RELATED TO THIS SERVICE CONTRACT. PREPARE THE JOURNAL ENTRIES FOR TUCSON IN 2017 RELATED TO THE MODIFIED SERVICE CONTRACT, ASSUMING PROSPECTIVE APPROACH. REPEAT THE REQUIREMENTS FOR NO. 2ASSUMING TUCSON AND WIGO AGREE ON A REVISED SET OF SERVICES (FEWER BOOKKEEPING SERVICES BUT MORE TAX SERVICES) IN THE EXTENDED CONTRACT PERIOD AND THE MODIFICATION RESULTS IN A SEPARATE PERFORMANCE OBLIGATION.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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CONTRACT MODIFICATION
TUCSON FINANCIAL SERVICES PERFORMS BOOK KEEPING AND TAX REPORTING SERVICES TO START UP COMPANIES IN THE OCONOMOWOC ARE. ON JANUARY 1, 2015 TUCSON ENTERED IN A 3 YEAR SERVICE CONTRACT WITH WIGO TECH. WIGO PROMISES TO PAY P20, 000 AT THE BEGINNING OF EACH YEAR. WHICH AT CONTRACT INCEPTION IS THE STANDALONE SELLING PRICE FOR THESE SERVICES. AT THE END OF SECOND YEAR, THECONTRACT IS MODIFIED AND THE FEE FOR THE THIRD YEAR OF SERVICES IS REDUCED TO 16, 000. IN ADDITION, WIGO AGREES TO PAY AN ADDITIONAL P40, 000 AT THE BEGINNING OF THE THIRD YEAR TO COVER THE CONTRACT FOR 3 ADDITIONAL YEARS (I.E 4 YEARS REMAIN AFTER THE MODIFICATION). THE EXTENDED CONTRACT SERVICES ARE SIMILAR TO THOSE PROVIDED IN THE FIRST 2 YEARS OF THE CONTRACT.
REQUIRED:
- PREPARE THE
JOURNAL ENTRIES FOR TUCSON IN 2015 AND 2016 RELATED TO THIS SERVICE CONTRACT. - PREPARE THE JOURNAL ENTRIES FOR TUCSON IN 2017 RELATED TO THE MODIFIED SERVICE CONTRACT, ASSUMING PROSPECTIVE APPROACH.
- REPEAT THE REQUIREMENTS FOR NO. 2ASSUMING TUCSON AND WIGO AGREE ON A REVISED SET OF SERVICES (FEWER BOOKKEEPING SERVICES BUT MORE TAX SERVICES) IN THE EXTENDED CONTRACT PERIOD AND THE MODIFICATION RESULTS IN A SEPARATE PERFORMANCE OBLIGATION.
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