Early in the year 20X1 Tech PC, a computer manufacturer, contracted with Forward University to ship 300 computers for a total price of CU 600,000 (CU 2,000 per computer). Due to the necessary preparatory work, Forward University agreed to ship the computers in 3 separate shipments over the next 3 months (100 computers in each shipment). Universitas Maju Jaya obtains control over the computer during delivery (FOB Shipping point). After the first shipment was made, Maju Jaya University and Tech PC changed the contract. Tech PC will supply an additional 200 computers (500 total). The agreed price for the additional 200 computers is CU 388,000, to be CU 1,940 per computer after deducting a 3% discount. Tech PC provides a volume discount of 3% on additional shipments which reflects the normal volume discount given in similar contracts with other customers. As of December 31, 20X1, Tech PC has shipped 400 computers (300 computers as initially agreed and 100 computers based on amended contract). Based on the above case, answer the following questions: Is the contract change are modification of a contract or a separate contract? How should Tech PC recognize revenue from this contract for the year ended December 31, 20X1. What is the total revenue recognized?

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter13: Emerging Topics In Managerial Accounting

Section: Chapter Questions

Problem 48E

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Early in the year 20X1 Tech PC, a computer manufacturer, contracted with Forward University to ship 300 computers for a total price of CU 600,000 (CU 2,000 per computer). Due to the necessary preparatory work, Forward University agreed to ship the computers in 3 separate shipments over the next 3 months (100 computers in each shipment). Universitas Maju Jaya obtains control over the computer during delivery (FOB Shipping point). After the first shipment was made, Maju Jaya University and Tech PC changed the contract. Tech PC will supply an additional 200 computers (500 total). The agreed price for the additional 200 computers is CU 388,000, to be CU 1,940 per computer after deducting a 3% discount. Tech PC provides a volume discount of 3% on additional shipments which reflects the normal volume discount given in similar contracts with other customers. As of December 31, 20X1, Tech PC has shipped 400 computers (300 computers as initially agreed and 100 computers based on amended contract).

Based on the above case, answer the following questions:

Is the contract change are modification of a contract or a separate contract?
How should Tech PC recognize revenue from this contract for the year ended December 31, 20X1. What is the total revenue recognized?

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