On January 1, 2021, Crucell N.V. sold an aeroengine along with a 4 year maintenance agreement to Sleazyjet Airlines for $1164. The standalone selling price of an engine is $776, while the standalone selling price of a maintenance contract is $194 per year. On January 1, the aeroengine was delivered to Sleazyjet. Ignoring the time value of money, the company should record revenue on January 1 of:

On January 1, 2021, Crucell N.V. sold an aeroengine along with a 4 year maintenance agreement to Sleazyjet Airlines for $1164. The standalone selling price of an engine is $776, while the standalone selling price of a maintenance contract is $194 per year. On January 1, the aeroengine was delivered to Sleazyjet. Ignoring the time value of money, the company should record revenue on January 1 of:

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 19E: Rix Company sells home appliances and provides installation and service for its customers. On April...

See similar textbooks

Similar questions

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.
On October 1, 2019, Grahams WeedFeed Inc. signs a contract to maintain the grounds for BigData Corp. The contract ends on March 31, 2020, and has a monthly payment of 3,200. The contract does not include any stipulations for additional periods. On June 1, Grahams WeedFeed and BigData sign a new 12-month contract that is retroactive to April 1, 2020. The monthly fee for the new contract is 4,000 per month and is also retroactive to April 1, 2020. During April and May of 2020, while the new contract was being negotiated, Grahams Weed Feed continued to maintain the grounds, and BigData continued to pay 3,200 per month. BigData was satisfied with Grahams WeedFeeds performance, and the only issue during negotiations was the monthly fee. Required: Determine if a valid contract exists between Grahams WeedFeed and BigData during April and May 2020.
Rix Company sells home appliances and provides installation and service for its customers. On April 1, 2019, a customer purchased a dishwasher that Rix normally sells for 1,000. In addition, the customer purchased the installation service and a 3-year service contract, with stand-alone selling prices of 200 and 400, respectively. Because the customer purchased all three items as a bundle, Rix charged the customer 1,400. Required: 1. How should the transaction price be allocated among the products? 2. Prepare the journal entries to recognize revenue related to each product in 2019.
In December 2019, Swanstrom Inc. receives a cash payment of $3,500 for services performed in December 2019 and a cash payment of S4,500 for services to be performed in January 2020. Swanstrom also receives the December utility bill for S600 but does not pay this bill until 2020. For 2019, under the accrual basis of accounting, Swanstrom would recognize: a. $8,000 of revenue and $600 of expense. b. $8,000 of revenue and $0 of expense. c. $3,500 of revenue and $600 of expense. d. $3,500 Of revenue and $0 of expense.
JustKitchens Inc. provides services to restaurants and hotels. The company supplies paper products, tableware, cookware, restaurant and kitchen equipment, and cleaning supplies. On January 2, 2019, Just-Kitchens enters into a contract with a local restaurant chain to provide its services for 3 years at a cost of 10,000 per year. The restaurant chain pays the total contract fee on January 2, 2019. JustKitchenss stand-alone selling price is also 10,000 per year. After 2 years, the restaurant asks to modify the contract. On January 2, 2021, the companies agree to reduce the fee for the third year to 9,000 in exchange for extending the contract for 2 additional years at a fee of 11,000 per year. This modification is agreed to by both parties, and on that date the restaurant chain pays for the additional 2 years of service. The 11,000 fee for the additional years is the same as JustKitchenss stand-alone price. Required: 1. How should JustKitchens account for the contract modification? 2. Prepare the journal entry that JustKitchens would make over the life of the contract.