A service provider has a 12-month agreement to provide a customer with services for which the custom pays $1,000 per month. The agreement does not include any provisions for automatic extensions, and expires on 30 November 2018. The two parties sign a new agreement on 28 February 2019 that requir the customer to pay $1,250 per month in fees, retroactive to 1 December 2018. The customer continued to pay $1,000 per month during December, January and February, and the servi provider continued to provide services during that period. There are no performance issues being disput between the parties in the expired period, only negotiation of rates under the new contract. Required Does a contract exist in December, January and February (prior to the new agreement being signed)?

A service provider has a 12-month agreement to provide a customer with services for which the custom pays $1,000 per month. The agreement does not include any provisions for automatic extensions, and expires on 30 November 2018. The two parties sign a new agreement on 28 February 2019 that requir the customer to pay $1,250 per month in fees, retroactive to 1 December 2018. The customer continued to pay $1,000 per month during December, January and February, and the servi provider continued to provide services during that period. There are no performance issues being disput between the parties in the expired period, only negotiation of rates under the new contract. Required Does a contract exist in December, January and February (prior to the new agreement being signed)?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 6C: On October 1, 2019, Grahams WeedFeed Inc. signs a contract to maintain the grounds for BigData Corp....

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On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.
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