Oriole 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. Oriole has the following arrangement with Blue Spruce Inc. Blue Spruce purchases equipment from Oriole for a price of $1,104,000 and contracts with Oriole to install the equipment. Oriole charges the same price for the equipment irrespective of whether it does the installation or not. Using market data, Oriole determines installation service is estimated to have a standalone selling price of $46,000. The cost of the equipment is $630,000. Blue Spruce is obligated to pay Oriole the $1,104,000 upon the delivery of the equipment. Oriole 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 Correct Answer How should the transaction price of $1,104,000 be allocated among the performance obligations? (Do not round intermediate 5075

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Hello,

Please help me figure out the standalone price for the equipment and installation and how you came to the price.

Oriole 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. Oriole has the following arrangement with Blue Spruce Inc.
Blue Spruce purchases equipment from Oriole for a price of $1,104,000 and contracts with Oriole to install the equipment.
Oriole charges the same price for the equipment irrespective of whether it does the installation or not. Using market data,
Oriole determines installation service is estimated to have a standalone selling price of $46,000. The cost of the equipment is
$630,000.
Blue Spruce is obligated to pay Oriole the $1,104,000 upon the delivery of the equipment.
Oriole 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 Correct Answer
How should the transaction price of $1,104,000 be allocated among the performance obligations? (Do not round intermediate
calculations. Round final answers to 0 decimal places, e.g. 5,275.)

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Prepare the journal entries for Oriole for this revenue arrangement on June 1, 2025 and September 30, 2025, assuming Oriole receives payment when the equiptment is delivered. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. List all debit entries before credit entries. Record journal entries in the order presented in the problem. Round answers to 0 decimal places, e.g. 5,275.)

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