Develop a revenue allocation analysis

Assignment Help Accounting Basics

Reference no: EM133475281

Case: BPP Company sells prefabricated pools that cost $80,000 to customers for $139,900. The sales price includes an installation fee, which is valued at $20,000. Also, the sales price includes 6 months of pool service (i.e., cleaning, chemicals, etc.), which is valued at $150/month. Pool services begin immediately following the installation of the pool. The fair value of the pool is $132,000. Both the installation of the pool and the pool services can be done by other, readily available, third parties. The installation of the pool is expected to take 3 months to complete.

BPP enters into a contract on 1/1/2023 with a homebuilder, Nocatee Development Corporation (NDC), whereby NDC purchases 4 of the prefabricated pools at the sales price of $139,900 for each pool. These pools will be delivered, installed and serviced by BPP at NDC's 4 new model homes being built at its latest housing development in northeast St. Johns County. BPP is required to deliver and install one pool per quarter during 2023. Delivery and installation of the first pool will begin on 1/1/2023. The contract specifies that NDC will pay 3/4 of the sales price for each pool at the beginning of each quarter when each pool installation is begun. NDC will pay the remaining sales price when the pool is completely installed. All payments were made timely by NDC during 2023.

BPP delivers the pools on the first day of each new quarter (e.g., 1/1, 4/1, etc.) and installation begins immediately thereafter.

BPP was successful at delivering and installing each pool in its respective 2023 quarter with completion dates for each pool on 3/31, 6/30, 9/30 and 12/31.

BPP began pool services for each pool once it was fully installed. NDC did not extend these services beyond the 6 month period provided in the contract.

Requirements:
Question 1: Using any format, develop a revenue allocation analysis for each of the performance obligations stated in the above arrangement for one pool only.

Question 2: record journal entries for BPP applicable to the period April through June 30, 2023. Be very careful...take special care to consider this timeframe.

Reference no: EM133475281

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