ac Company's products range from simple automated machinery to complex systems containing numerous components. Unit selling prices range from $140,000 to $800,000 and are quoted inclusive of training offered to customers. Y Company is a customer of Mac. Y purchases an equipment from Mac for a price of $300,000 that also includes Mac providing training to Y's employees. Assuming the equipment and the training services are two distinct performance obligations. The equipment has a fair-value of $264,000 and the training services are estimated to have a fair value of $66,000. The original cost of the equipment for Mac was $100,000, which Mac paid in April 20X3. Y pays Mac the full $300,000 upon delivery of the uipment on August 1, 20X3. On September 6, 20X3 Mac uses a third party, TrainMe Inc, to offer the training to Y employees. TainMe charges $26,000 to Mac which Mac pays in October 20X3. Mac's accountant recorded the entire $300,000 as revenue on August 1, 20X3 when the equipment was delivered to Y Company. As for the expenses related to the sale, the $100,000 cost of the equipment was expensed in April 20X3, and the training costs of $26,000 was expensed in October when payment was made to TrainMe. Mac provides monthly financial statements to its investors. Based on the information provided above, explain if Mac's accountant is correct in the "timing" and "amount" recognized in each month as a) Revenues b) Expenses
Mac Company's products range from simple automated machinery to complex systems containing numerous components. Unit selling prices range from $140,000 to $800,000 and are quoted inclusive of training offered to customers. Y Company is a customer of Mac. Y purchases an equipment from Mac for a price of $300,000 that also includes Mac providing training to Y's employees. Assuming the equipment and the training services are two distinct performance obligations. The equipment has a fair-value of $264,000 and the training services are estimated to have a fair value of $66,000. The original cost of the equipment for Mac was $100,000, which Mac paid in April 20X3. Y pays Mac the full $300,000 upon delivery of the uipment on August 1, 20X3. On September 6, 20X3 Mac uses a third party, TrainMe Inc, to offer the training to Y employees. TainMe charges $26,000 to Mac which Mac pays in October 20X3.
Mac's accountant recorded the entire $300,000 as revenue on August 1, 20X3 when the equipment was delivered to Y Company. As for the expenses related to the sale, the $100,000 cost of the equipment was expensed in April 20X3, and the training costs of $26,000 was expensed in October when payment was made to TrainMe.
Mac provides monthly financial statements to its investors.
Based on the information provided above, explain if Mac's accountant is correct in the "timing" and "amount" recognized in each month as
a) Revenues
b) Expenses
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