Crane Company manufactures products ranging from simple automated machinery to complex systems containing numerous components. Unit selling prices range from $200,000 to $1,500,000 and are quoted inclusive of installation. The installation process does not involve changes to the features of the equipment and does not require proprietary information about the equipment in order for the installed equipment to perform to specifications. Crane has the following arrangement with Shamrock Inc. Shamrock purchases equipment from Crane for a price of $1,088,700 and contracts with Crane to install the equipment. Crane charges the same price for the equipment irrespective of whether it does the installation or not. Using market data, Crane determines installation service is estimated to have a standalone selling price of $57,300. The cost of the equipment is $580,000. Shamrock is obligated to pay Crane the $1,088,700 upon the delivery of the equipment. Crane delivers the equipment on June 1, 2025, and completes the installation of the equipment on September 30, 2025. The equipment has a useful life of 10 years. Assume that the equipment and the installation are two distinct performance obligations which should be accounted for separately. (a) Your answer is correct. How should the transaction price of $1,088,700 be allocated among the performance obligations? (Do not round intermediate calculations. Round final answers to O decimal places, e.g. 5,275.) Equipment Installation tA 1034265 54435
Crane Company manufactures products ranging from simple automated machinery to complex systems containing numerous components. Unit selling prices range from $200,000 to $1,500,000 and are quoted inclusive of installation. The installation process does not involve changes to the features of the equipment and does not require proprietary information about the equipment in order for the installed equipment to perform to specifications. Crane has the following arrangement with Shamrock Inc. Shamrock purchases equipment from Crane for a price of $1,088,700 and contracts with Crane to install the equipment. Crane charges the same price for the equipment irrespective of whether it does the installation or not. Using market data, Crane determines installation service is estimated to have a standalone selling price of $57,300. The cost of the equipment is $580,000. Shamrock is obligated to pay Crane the $1,088,700 upon the delivery of the equipment. Crane delivers the equipment on June 1, 2025, and completes the installation of the equipment on September 30, 2025. The equipment has a useful life of 10 years. Assume that the equipment and the installation are two distinct performance obligations which should be accounted for separately. (a) Your answer is correct. How should the transaction price of $1,088,700 be allocated among the performance obligations? (Do not round intermediate calculations. Round final answers to O decimal places, e.g. 5,275.) Equipment Installation tA 1034265 54435
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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