Ohio Contract Revenue Analysis: Contract Price: Units Price Contract Price Step 1: Step 2: Step 3: Total Sales 1500 > 1,500 > 2,000 >2,500 > 3,000 >5,000 Step 4: Performance obligation Scooter Maintenance Contract Liability 2,470 855 2,111,850 Maintenance Computation: Maintenance per scooter for 3 years Months Maintenance per scooter per month Contract exists 2 performance obligations because they are distinct Determine the transaction price - variable consideration Consideration/Unit Probability Discount 0% 1% It is 72% likely that revenue will not be reversed, so probably no constraints on variable consideration. Although there is some judgment here as to whether Transaction Price, assuming no constraint Transaction Price, assuming constraint 834.91 829.35 2% 3% 4% 5% SSP Allocate the transaction price 550 300 850 20.09 294.67 36 8.185277778 855.00 846.45 837.90 829.35 820.80 812.25 Percentage 2% 15% 55% 10% 10% 8% 100% 64.71% 35.29% 100.00% Expected Consideration 17.10 126.97 460,85 82.94 82.08 64.98 834.91 540.24 294.67 834.91 Allocated TP - no constraint Allocated TP - constraint 536.64 292.71 829.35 1
Ohio Contract Revenue Analysis: Contract Price: Units Price Contract Price Step 1: Step 2: Step 3: Total Sales 1500 > 1,500 > 2,000 >2,500 > 3,000 >5,000 Step 4: Performance obligation Scooter Maintenance Contract Liability 2,470 855 2,111,850 Maintenance Computation: Maintenance per scooter for 3 years Months Maintenance per scooter per month Contract exists 2 performance obligations because they are distinct Determine the transaction price - variable consideration Consideration/Unit Probability Discount 0% 1% It is 72% likely that revenue will not be reversed, so probably no constraints on variable consideration. Although there is some judgment here as to whether Transaction Price, assuming no constraint Transaction Price, assuming constraint 834.91 829.35 2% 3% 4% 5% SSP Allocate the transaction price 550 300 850 20.09 294.67 36 8.185277778 855.00 846.45 837.90 829.35 820.80 812.25 Percentage 2% 15% 55% 10% 10% 8% 100% 64.71% 35.29% 100.00% Expected Consideration 17.10 126.97 460,85 82.94 82.08 64.98 834.91 540.24 294.67 834.91 Allocated TP - no constraint Allocated TP - constraint 536.64 292.71 829.35 1
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Please list all of the
Ohio Contract
- On September 7th of the current year (2022), PP signed a contract with Ohio Contract, a large city in the northeast. PP will provide Ohio with 2,470 scooters for $855 each. Each of the scooters is included in a service agreement, whereby PP will provide all maintenance on the scooters for 3 years.
- In addition, it will provide labor at no charge for these repairs. At the time of the repair, PP will bill Ohio for the parts needed to accomplish the repair. Ohio paid WTG on September 7th of the current year. PP will deliver 665 scooters on October 1 of the current year, 875 scooters on January 1 of next year, and 930 scooters on April 1 of the next year.
- Because of the size of Ohio, and its potential to buy many more scooters, PP offers them a volume discount, based on how many scooters they purchase between September 7th of the current year and December 31st of the following year. The discount applies to both the scooters and the maintenance agreements. Any discounts will be retroactive to all of the scooters they have purchased.
- Hint: Use the "Contract Liability" account to record differences between the cash received and the transaction price.
- The analysis of the first four steps in the revenue recognition process is attached:
Transcribed Image Text:Ohio Contract Revenue Analysis:
Contract Price:
Units
Price
Contract Price
Step 1:
Step 2:
Step 3:
Total Sales
1500
> 1,500
> 2,000
>2,500
> 3,000
>5,000
Step 4:
Performance obligation
Scooter
Maintenance
Contract Liability
2,470
855
2,111,850
Maintenance Computation:
Maintenance per scooter for 3 years
Months
Maintenance per scooter per month
Contract exists
2 performance obligations because they are distinct
Determine the transaction price - variable consideration
Consideration/Unit Probability
Discount
0%
1%
It is 72% likely that revenue will not be reversed, so probably no constraints on variable consideration. Although there is some judgment here as to whether
Transaction Price, assuming no constraint
Transaction Price, assuming constraint
834.91
829.35
2%
3%
4%
5%
SSP
Allocate the transaction price
550
300
850
20.09
294.67
36
8.185277778
855.00
846.45
837.90
829.35
820.80
812.25
Percentage
2%
15%
55%
10%
10%
8%
100%
64.71%
35.29%
100.00%
Expected Consideration
17.10
126.97
460,85
82.94
82.08
64.98
834.91
540.24
294.67
834.91
Allocated TP - no constraint Allocated TP - constraint
536.64
292.71
829.35
1
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