Chapter 17 Quizzes Flashcards
On January 31, 2025, Sanders Company enters into a contract to build custom equipment for Baker Company. The contract specified a delivery date of March 1. However, the equipment was not delivered until March 31. The contract required full payment of $50,000, 30 days after delivery. The revenue for this contract should be recorded on what date?
March 31 at delivery.
Newton Construction enters into a contract on July 1, 2025 with a customer to b build a warehouse for $1,500,000. The contract includes a performance bonus of $25,000 if the building is completed by November 30, 2025. The bonus is reduced by $10,000 each week that completion is delayed. Newton commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:
November 30, 2025: 70%
December 7, 2025: 20%
December 14, 2025: 7%
December 21, 2025: 3%
Calculate the transaction price for this contract.
November 30: 1,525,000 x 0.70 = 1,067,500
December 7: 1,515,000 x 0.20 = 303,000
December 14: 1,505,000 x 0.07 = 105,350
December 21: 1,500,000 x 0.03 = 45,000
1,067,500 + 303,000 + 105,350 + 45,000 = 1,520,850
Maker & Jones is a full-service technology company. They provide equipment, installation services as well as training. Customers can purchase any product or service separately or as a bundled package. Caldwell Corporation purchased computer equipment, installation, and training for a total cost of $144,000 on March 15, 2025. Estimated standalone fair values of the equipment, installation and training are $90,000, $60,000, and $30,000 respectively. Calculate the transaction price allocated to equipment, installation, and training.
90,000 + 60,000 + 30,000 = 180,000
Equipment: (90,000 / 180,000) x 144,000 = 72,000
Installation: (60,000 / 180,000) x 144,000 = 48,000
Training: (30,000 / 180,000) x 144,000 = 24,000
