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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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GrillMaster Inc. sells an industry-leading line of outdoor charcoal and gas grills to customers through its online store as well as national home improvement stores. While the majority of the company’s grills is mass produced, the company also provides custom grill products as part of its high-end line of products. Three independent scenarios are described below.

  1. a. GrillMaster Inc. agrees to provide an outdoor gas grill, replacement parts, and installation of the grill to a customer as part of its “Get Ready for Summer” promotion. The replacement parts and installation services are available from other vendors.
  2. b. GrillMaster agrees to provide a custom gas grill and replacement parts to a customer utilizing a proprietary grilling technology. Due to the proprietary nature of the product, no other vendor sells either product. The grill is delivered on April 1, 2019, and the replacement parts are delivered in the following month.
  3. c. Assume the same facts as in b, but because of production delays, GrillMaster delivers the replacement parts prior to delivery of the grill.

Required:

List each performance obligation in the contract.

To determine

List each performance obligation in the contract.

Explanation

Contract:

Contract is an agreement among two parties or more parties which includes enforceable obligations and rights. A contract can be written, oral or implied by ordinary business practices.

Scenario a:

a. There are three performance obligations in the contract:

  • The gas grill,
  • The replacement parts,
  • The installation services.

All of the three obligations are capable of being distinct since, they are separately sold. Additionally, these obligations are distinct  within the context of the contract for the reason there is no considerable integration of the promised goods or services not does one of the promised goods significantly modify another promised good or service for instance, the installation does not require a significant modification of the grill.

Scenario b:

b...

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