Concept explainers
Allocation of Variable Consideration. Green-Up Inc contracts with a building manager to provide goods and services to enhance the energy efficiency It offers consulting services, including recommending ways to increase energy efficiency and monitor performance It also provides items such as thermostats and automatic light switches as part of the contract Green- Up charges 60% of the reduction in energy usage during the first year as a consulting fee Green- Up determines that the consulting services compose one performance obligation and the items provided are another performance obligation The estimated standalone selling prices are $180,000 for the consulting services and $100,000 for the items to increase energy efficiency The stated price in the contract for the items provided is a fixed payment of $60,000 The pnce stated for the consulting fees is 60% of the customer's reduction in future energy costs Green-Up estimates that the customer will reduce its energy usage by $500,000 The customer s actual energy reduction is $550,000 What amount of the transaction price should Green-Up allocate to each performance obligation?
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INTERMEDIATE ACCOUNTING
- A builder enters into a contract with a customer to redesign and update an office buidling for an agreed upon contract price of $2,400,000 and construction is estimated to take three years at a total estimated cost of $2,000,000. Assuming costs may fluctuate over the 3-year construction period. Which statement is most accurate regarding revenue recognition for this contract? The builder should recognize revenue over time using the cost-to-cost (percentage of completion) method. The builder should wait to recognize revenue until the full construction is complete at the end of the three year period. The builder should recognize recognize revenue across the three year construction period as they collect cash payments. The builder should recognize all revenue for the contract at the start of construction when the contract is initially signed.arrow_forwardJUBAIL BUILDERS is constructing a multi-unit residential complex. In the prior year, JUBAIL BUILDERS entered into a contract with a customer for a specific unit that is under construction. JUBAIL has determined that the contract is a single performance obligation satisfied over time. JUBAIL BUILDERS gathered the following information for the contract during the year. JUBAIL BUILDERS-Year Ended December 31, 2018: Costs to date 10,500,000 Future expected costs 7,000,000 Work certified to date 12,600,000 Expected Sales value 22,400,000 Revenue taken in earlier period 8,400,000 Costs taken in earlier periods 6,650,000 Calculate the amounts to be included in the statement of profit or loss in respect of revenue and costs for the year ended December 31, 2018 on both methods (I) Input Method (cost basis), and (II) Output Method (Sales Basis) Calculate the total expected profit for the year 2018?arrow_forwardFabulous Fabricators needs to decide how to allocate space in its production facility this year. It is considering the following contracts: a. What are the profitability indexes of the projects? b. What should Fabulous Fabricators do? **round to two decimal places**arrow_forward
- Plot the relationship between customer-service costs and number of service reports. Is the relationship economically plausible?arrow_forwardNeed help with the following question,arrow_forwardGeorge Co. enters into a contract to build an apartment for Jungle Co. For a fixed fee of P20,000,000. At contract inception, George Co. assesses its performance obligations in the contract and concludes that it has a single performance obligation that is satisfied over time. George Co. determines that the measure of progress that best depicts its performance in the contract is input method based on costs incurred. George estimates that the total contract costs would amount to P16,000.000 over the construction period. George incurs contract costs of P2,000,000 during the year. How much revenue is recognized for the year?arrow_forward
- Sandhill Communications contracted to set up a call center for the City of Phoenix. Under the terms of the contract, Sandhill Communications will design and set-up a call center with the following costs: Design of call center $18000 Computers, servers, telephone equipment $510000 Software $150000 Installation and testing of equipment $26000 Selling commission $46000 Annual service contract $80000 In addition, Sandhill Communications will maintain and service the equipment and software to ensure smooth operations of the call center for an annual fee of $160000. Ownership of equipment installed remains with the City of Phoenix. The contract costs that should be capitalized is $678000. $830000. $660000. $750000.arrow_forwardSage Reclaimers entered into a contract with Pronghorn Demolition to manage the processing of recycled materials on Pronghorm various demolition projects. Services for the 3-year contract include collecting, sorting, and transporting reclaimed materials to recycling centers or contractors who will reuse them. Sage incurs selling commission costs of $2,180 to obtain the contract. Before performing the services, Sage also designs and builds receptacles and loading equipment that interfaces with Pronghorn demolition equipment at a cost of $25,100. These receptacles and equipment are retained by Sage and can be used for other projects. Pronghorn promises to pay a fixed fee of $12,850 per year, payable every 6 months for the services under the contract. Sage incurs the following costs: design services for the receptacles to interface with Pronghorn equipment $3,220, loading equipment controllers $6,400, and special testing and OSHA inspection fees $2,180 (some of Pronghorn projects are on…arrow_forwardDetermining the Transaction Price for a Revenue Contract A contractor enters into a revenue contract with a customer to build customized equipment for $180,000 with a performance bonus of $99,000 that will be paid based on how quickly the equipment is completed. The amount of the performance bonus decreases by 15% of the original bonus per week for every week beyond the agreed upon completion date. The contractor has had experiences with similar contracts and thus has the data to predict the timing of completion of the contract. Therefore, the contractor concludes that the expected value method is the best predictor of revenue. The contractor estimates that there is a 60% probability that the contract will be completed by the agreed-upon completion date, a 35% probability that it will be completed one week late, and a 5% probability that it will be completed two weeks late. Complete the following table in order to determine the transaction price for revenue recognition for the…arrow_forward
- I need the subset of questions with the favorable non favorable and preferable filled out please thank youarrow_forwardUse the high-low method to compute the cost function relating customer-service costs to the number of service reports.arrow_forwardFabulous Fabricators needs to decide how to allocate space in its production facility this year. It is considering the following contracts: a. What are the profitability indexes of the projects? b. What should Fabulous Fabricators do? a. What are the profitability indexes of the projects? The profitability index for contract A is (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) NPV Use of Facility Contract A $1.99 million 100% $0.96 million 50% $1.52 million 50% B с Print ACCES Done - Xarrow_forward
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningSurvey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning