Sandhill Company manufactures equipment. Sandhill's products range from simple automated machinery to complex systems containing numerous components. Unit selling prices range from $225,000 to $1,500,000, and are quoted inclusive of installation. The installation process does not involve changes to the features of the equipment to perform to specifications. Sandhill has the following arrangement with Tamarisk Inc. ● Tamarisk purchases equipment from Sandhill on May 2, 2023, for a price of $1,034,000 and contracts with Sandhill to install the equipment. Sandhill charges the same price for the equipment irrespective of whether it does the installation or not. Using market data, Sandhill determines that the installation service is estimated to have a fair value of $66,000. The cost of the equipment is $700,000. (a) Tamarisk is obligated to pay Sandhill the $968,000 on delivery of the equipment and the balance on the completion of the installation. Sandhill delivers the equipment on June 1, 2023, and completes the installation of the equipment on September 30, 2023. Assume that the equipment and the installation are two distinct performance obligations that should be accounted for separately. Your answer is correct. Allocate the transaction price of $1,034,000 among the performance obligations of the contract. Assume Sandhill follows IFRS. (Round percentage allocations to 2 decimal places, e.g. 12.25% and final answers to O decimal places, e.g. 5,275.) Delivery equipment $ Installation $ 971960 62040
Sandhill Company manufactures equipment. Sandhill's products range from simple automated machinery to complex systems containing numerous components. Unit selling prices range from $225,000 to $1,500,000, and are quoted inclusive of installation. The installation process does not involve changes to the features of the equipment to perform to specifications. Sandhill has the following arrangement with Tamarisk Inc. ● Tamarisk purchases equipment from Sandhill on May 2, 2023, for a price of $1,034,000 and contracts with Sandhill to install the equipment. Sandhill charges the same price for the equipment irrespective of whether it does the installation or not. Using market data, Sandhill determines that the installation service is estimated to have a fair value of $66,000. The cost of the equipment is $700,000. (a) Tamarisk is obligated to pay Sandhill the $968,000 on delivery of the equipment and the balance on the completion of the installation. Sandhill delivers the equipment on June 1, 2023, and completes the installation of the equipment on September 30, 2023. Assume that the equipment and the installation are two distinct performance obligations that should be accounted for separately. Your answer is correct. Allocate the transaction price of $1,034,000 among the performance obligations of the contract. Assume Sandhill follows IFRS. (Round percentage allocations to 2 decimal places, e.g. 12.25% and final answers to O decimal places, e.g. 5,275.) Delivery equipment $ Installation $ 971960 62040
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...
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