Plucky Company recently entered into a contract in which Plucky charges a price of actual cost plus 20%. If the price charged based on this formula is less than the target price of $4,500,000, Plucky is entitled to also receive 50% of the difference between the actual cost and the cost that would lead to the formula price equalling the target price. Plucky incurred an actual cost of $3,600,000. How much will Plucky make from the contract? a) $4,320,000 b) $4,395,000 c) $4,410,000 d) $4,500,000

Plucky Company recently entered into a contract in which Plucky charges a price of actual cost plus 20%. If the price charged based on this formula is less than the target price of $4,500,000, Plucky is entitled to also receive 50% of the difference between the actual cost and the cost that would lead to the formula price equalling the target price. Plucky incurred an actual cost of $3,600,000. How much will Plucky make from the contract? a) $4,320,000 b) $4,395,000 c) $4,410,000 d) $4,500,000

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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Yankee Corp. agrees to provide Albany Company 24 months of coaching services. The contract sets the price at 4,000 per month, which is the normal stand-alone price that Yankee charges. After 16 months, Yankee and Albany agree to modify the contract. Yankee reduces the fee for the 8 remaining months to 3,800 per month, and Albany agrees to a 24-month extension at a cost of 3,600 per month. At the time that the contract is modified, Yankee is charging other customers 3,750 per month for the coaching service. Should Yankee and Albany treat the modification as a separate contract?
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.
Plucky Company recently entered into a contract in which Plucky charges a price of actual cost plus 20%. If the price charged based on this formula is less than the target price of $4,500,000, Plucky is entitled to also receive 50% of the difference between the actual cost and the cost that would lead to the formula price equalling the target price. Plucky incurred an actual cost of $3,600,000. How much will Plucky make from the contract? a) $4,320,000 b) $4,395,000 c) $4,410,000 d) $4,500,000 Pleae help me sir.. it's too difficult
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