Reference no: EM132643605
Question - Company prepares monthly financial statements. Company sells precision equipment. They also sell service agreements for calibrating precision equipment (both to their customers and the public). Machine X normally sells for $54,000. A 12-month contract to calibrate the equipment on a monthly basis normally sells for $6,000.
In January Company sells a customer a package that includes Machine X and the calibration contract for $48,000.
The equipment is delivered to the customer in January.
The calibration services will be provided over 12 months beginning in February.
There are 2 performance obligations in this package, the equipment and the calibration contract.
1. What amount is allocated to the equipment sale performance obligation?
2. What amount is allocated to the calibration contract performance obligation?
3. How much revenue is recognized in January related to this contract? (Ignore any expenses- this is about the revenue only).
4. How much revenue is recognized in February related to this contract? (Ignore any expenses- this is about the revenue only).
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