traded, has a May 31 year end. On February 18, 2024, Crane signed a contract with Waterway Harvesting Ltd. to design and build 25 custom harvesters that can harvest wood at the steep grades found along many of the Pacific Coast timber stands included in Waterway's harvesting leases. The following events took place in 2024 in relation to the contract: 1. 2. 3. 4. 5. 6. February 18: Officials from Crane and Waterway sign the contract. The contract was for $5.4 million. Crane is to design, manufacture, and deliver the 25 machines to Waterway's operations centre in Duncan, British Columbia. Crane's management estimates that the design component of the contract would be valued at $537,000 if contracted for separately, while the machine construction component of the contract would be valued at $5.3 million if the machines were purchased separately. Crane agrees to provide a three-year assurance-type warranty for the machines, and the company's management estimates that the warranty claims would total $270,000 based on past experience. Waterway agrees to pay a $1,320,000 deposit within 10 days of signing the contract and to pay the balance within 15 days of the equipment being delivered. February 25: Waterway pays the deposit specified in the contract. March 28: Crane's engineering staff complete the equipment design and it is approved by officials from Waterway. May 18: Crane completes construction of the 25 harvesters. May 20: The 25 harvesters are loaded onto Crane's trucks and are delivered to Waterway's operation centre in Duncan later that day. June 2: Waterway pays the balance owing on the contract.
traded, has a May 31 year end. On February 18, 2024, Crane signed a contract with Waterway Harvesting Ltd. to design and build 25 custom harvesters that can harvest wood at the steep grades found along many of the Pacific Coast timber stands included in Waterway's harvesting leases. The following events took place in 2024 in relation to the contract: 1. 2. 3. 4. 5. 6. February 18: Officials from Crane and Waterway sign the contract. The contract was for $5.4 million. Crane is to design, manufacture, and deliver the 25 machines to Waterway's operations centre in Duncan, British Columbia. Crane's management estimates that the design component of the contract would be valued at $537,000 if contracted for separately, while the machine construction component of the contract would be valued at $5.3 million if the machines were purchased separately. Crane agrees to provide a three-year assurance-type warranty for the machines, and the company's management estimates that the warranty claims would total $270,000 based on past experience. Waterway agrees to pay a $1,320,000 deposit within 10 days of signing the contract and to pay the balance within 15 days of the equipment being delivered. February 25: Waterway pays the deposit specified in the contract. March 28: Crane's engineering staff complete the equipment design and it is approved by officials from Waterway. May 18: Crane completes construction of the 25 harvesters. May 20: The 25 harvesters are loaded onto Crane's trucks and are delivered to Waterway's operation centre in Duncan later that day. June 2: Waterway pays the balance owing on the contract.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Crane Corp. designs and builds custom harvesting equipment for logging companies across Canada. The company, which is publicly
traded, has a May 31 year end. On February 18, 2024, Crane signed a contract with Waterway Harvesting Ltd. to design and build 25
custom harvesters that can harvest wood at the steep grades found along many of the Pacific Coast timber stands included in
Waterway's harvesting leases. The following events took place in 2024 in relation to the contract:
1.
2.
3.
4.
5.
6.
(al)
February 18: Officials from Crane and Waterway sign the contract. The contract was for $5.4 million. Crane is to design,
manufacture, and deliver the 25 machines to Waterway's operations centre in Duncan, British Columbia. Crane's
management estimates that the design component of the contract would be valued at $537,000 if contracted for separately,
while the machine construction component of the contract would be valued at $5.3 million if the machines were purchased
separately. Crane agrees to provide a three-year assurance-type warranty for the machines, and the company's management
estimates that the warranty claims would total $270,000 based on past experience. Waterway agrees to pay a $1,320,000
deposit within 10 days of signing the contract and to pay the balance within 15 days of the equipment being delivered.
February 25: Waterway pays the deposit specified in the contract.
March 28: Crane's engineering staff complete the equipment design and it is approved by officials from Waterway.
May 18: Crane completes construction of the 25 harvesters.
May 20: The 25 harvesters are loaded onto Crane's trucks and are delivered to Waterway's operation centre in Duncan later
that day.
June 2: Waterway pays the balance owing on the contract.
Determine when and how much revenue Crane would be able to recognize for the year ended May 31, 2024. (Round allocation
percentage to 2 decimal places, e.g. 15.25% and final answers to O decimal places, e.g. 125.)
Revenue recognized on
Revenue recognized on
March 28, 2024
May 20, 2024
$
$
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