Case 04-7: Lighthouse

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Case 04-7: Lighthouse I. Summary The Lighthouse Company is dedicated to offer services to marine or shipping companies. Their services are based on the tracking and location of the boats of their clients. In order to offer the service, Lighthouse must install an equipment of tracking boats which will have a cost of sale of $10.000,00 dollars, no reimbursable and a tracking system with a monthly cost of sale of $300,00 dollars. This way their clients will continuously receive the data on the location and routes of their boats. The clients must accept this service by means of two contracts. One that stipulates the purchase of the tracking equipment and other that stipulates the monthly fee by the tracking service, usually with…show more content…
• 605-15-05-3, Revenue Recognition –Products; the buyer has right the return the product and cannot resale the products. • 605-20, Revenue Recognition Services • 605-20-25, Revenue Recognition Services; recording a particular item in the financial statements. • 605-20-25-4, Revenue Recognition Services; acquisition of a contract and that would have not been incurred but for the acquisition of that contract shall be deferred and charge to expense in proportion to the revenue recognized. • 605-25-25, Revenue Recognition-Multiple Element Arrangements-Recognition • 605-25-25-1, Revenue Recognition-Multiple Element Arrangements-Recognition; multiple deliverable, should divided into separate units of accounting • 605-25-25-2, Revenue Recognition-Multiple Element Arrangements-Recognition; multiple deliverable, should be measured and allocated among the separate units of accounting • 605-25-25-3, Revenue Recognition-Multiple Element Arrangements-Recognition; separated contract with the same entity, near or at the same time are considerate as a package. • SEC No. 101, Revenue Recognition In Financial Statements • SEC No. 104, Revenue Recognition – Product, Recognize the agreement when the equipment was installed. • EITF 00-21, Revenue Arrangements with Multiple Deliverables. III. Analysis All the FASB, SEC and EITF provide related information to the case. Despite we must consider the main data. Two contracts, one for

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