Larkspur Company manufactures equipment. Larkspur's products range 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. Larkspur has the following arrangement with Winkerbean. Inc. . Winkerbean purchases equipment from Larkspur for a price of $1,060,000 and contracts with Larkspur to install the equipment. Larkspur charges the same price for the equipment irrespective of whether it does the installation or not. The cost of the equipment is $558,000. Winkerbean is obligated to pay Larkspur the $1,060,000 upon the delivery and installation of the equipment. Larkspur delivers the equipment on June 1, 2020, and completes the installation of the equipment on September 30, 2020. 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. Assuming Larkspur does not have market data with which to determine the standalone selling price of the installation services. As a result, an expected cost plus margin approach is used. The cost of installation is $36,300; Larkspur prices these services with a 25% margin relative to cost. Incorrect answer iconYour answer is incorrect. How should the transaction price of $1,060,000 be allocated among the service obligations? (Do not round Intermediate calculations. Round final answers to O decimal places.) Equipment $ Installation S
Larkspur Company manufactures equipment. Larkspur's products range 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. Larkspur has the following arrangement with Winkerbean. Inc. . Winkerbean purchases equipment from Larkspur for a price of $1,060,000 and contracts with Larkspur to install the equipment. Larkspur charges the same price for the equipment irrespective of whether it does the installation or not. The cost of the equipment is $558,000. Winkerbean is obligated to pay Larkspur the $1,060,000 upon the delivery and installation of the equipment. Larkspur delivers the equipment on June 1, 2020, and completes the installation of the equipment on September 30, 2020. 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. Assuming Larkspur does not have market data with which to determine the standalone selling price of the installation services. As a result, an expected cost plus margin approach is used. The cost of installation is $36,300; Larkspur prices these services with a 25% margin relative to cost. Incorrect answer iconYour answer is incorrect. How should the transaction price of $1,060,000 be allocated among the service obligations? (Do not round Intermediate calculations. Round final answers to O decimal places.) Equipment $ Installation S
Chapter1: Financial Statements And Business Decisions
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Larkspur Company manufactures equipment. Larkspur's products range 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
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. Larkspur has the following arrangement with Winkerbean
Inc.
Winkerbean purchases equipment from Larkspur for a price of $1,060,000 and contracts with Larkspur install the equipment. Larkspur charges the same price for the equipment irrespective f whether it does the installation or not. The cost of the equipment is
$558,000.
Winkerbean is obligated to pay Larkspur the $1,060,000 upon the delivery and installation of the equipment.
Larkspur delivers the equipment on June 1, 2020, and completes the installation of the equipment on September 30, 2020. 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.
Assuming Larkspur does not have market data with which to determine the standalone selling price of the installation services. As a result, an expected cost plus margin approach is used. The cost of installation is $36,300; Larkspur prices these services with a 25% margin
relative to cost.
(a)
Incorrect answer iconYour answer is incorrect.
How should the transaction price of $1,060,000 be allocated among the service obligations? (Do not round Intermediate calculations. Round final answers to O decimal places.)
Equipment S
Installation S
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