Q1: How many performance obligations are included in this contract? Q2: What is the transaction price? Q3: How much of the transaction price is allocated to each of the performance obligations based on their stand-alone selling price? (In the box below, write the respective performance obligations followed by their allocated transaction price. E.g. Computer $50,000; Customer Service $80,000)
Q1: How many performance obligations are included in this contract? Q2: What is the transaction price? Q3: How much of the transaction price is allocated to each of the performance obligations based on their stand-alone selling price? (In the box below, write the respective performance obligations followed by their allocated transaction price. E.g. Computer $50,000; Customer Service $80,000)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
For the last 3 Parts
There are 2 performance obligations in this contract.
- To provide 100 ingredients weighing systems
- To provide 1 year service contract of equipment on an as-needed basis.
Part 2.
Transaction price = 100 system * $ 900 each
= $900000 Answer
Step 3
Part 3.
Allocation of transaction price:
Given, If sold separately
- Scale = 600 (60%)
- Computer = 100 (10%)
- Service contract = 300 (30%)
- Total = 1000 (100%)
Price per unit = 900
- Attributable to service contact = 30 % = $270
- Attributable to scales & computer = 70 % = $630
Answer
Allocation of Transaction Price for 100 units
- Service contact = $ 27000
- Computer & scales = $ 63000
Transcribed Image Text:On July 15, 2020, Dahlin signed a contract to provide Sabre-Fresh Baking Co. with
100 ingredient-weighing systems for a price of $900 each. Each system includes
finely tuned scales, a computer terminal, and a one-year (12 month) contract to
service Sabre-Fresh's automated equipment on an as-needed basis. The scales,
computers, and service contracts are all separately identifiable and are capable of
being used on their own or with products obtained from other sources. If Dahlin was
to provide these goods or services separately, it would charge $600 for the scales,
$100 for the computer, and $300 for the service contract. Dahlin delivered and
installed the scales and computers on August 1, 2020, and the service contract
began on that date. Answer the following questions in the box below, numbering
your answers to keep consistent with the questions asked:
Q1: How many performance obligations are included in this contract?
Q2: What is the transaction price?
Q3: How much of the transaction price is allocated to each of the performance
obligations based on their stand-alone selling price? (In the box below, write the
respective performance obligations followed by their allocated transaction price. E.g.
Computer $50,000; Customer Service $80,000)
Q4: Record the appropriate journal entry or entries (if any) on July 15, 2020.
Q5: Record the appropriate journal entry or entries (if any) on August 1, 2020.
Q6: Record the appropriate journal entry or entries (if any) on August 31. 2020.
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