Barrios Communications is a provider of satellite television services. It will install a satellite dish free of charge for any customer that agrees to a one-year service contract at a price of $50 per month. Installation costs Barrios $150. Customers typically remain with Barrios for much longer than the one year required, an average of 10 years (i.e., 9 years beyond their contractual obligation). Barrios enters into a contract under the terms described above on January 1, 20X1. Required: 1. What amount of revenue should Barrios record related to the contract in 20X1? 2. What amount of expense related to the contract should Barrios record related to the contract in 20X1?

Barrios Communications is a provider of satellite television services. It will install a satellite dish free of charge for any customer that agrees to a one-year service contract at a price of $50 per month. Installation costs Barrios $150. Customers typically remain with Barrios for much longer than the one year required, an average of 10 years (i.e., 9 years beyond their contractual obligation). Barrios enters into a contract under the terms described above on January 1, 20X1. Required: 1. What amount of revenue should Barrios record related to the contract in 20X1? 2. What amount of expense related to the contract should Barrios record related to the contract in 20X1?

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 2RE: Yankee Corp. agrees to provide Albany Company 24 months of coaching services. The contract sets the...

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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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Barrios Communications is a provider of satellite television services. It will install a satellite dish free of charge for any customer that agrees to a one-year service contract at a price of $50 per month. Installation costs Barrios $150. Customers typically remain with Barrios for much longer than the one year required, an average of 10 years (i.e., 9 years beyond their contractual obligation). Barrios enters into a contract under the terms described above on January 1, 20X1. Required: What amount of revenue should Barrios record related to the contract in 20X1? What amount of expense related to the contract should Barrios record related to the contract in 20X1?
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