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6. a Chase Appliance Store is an experienced home appliance dealer. Chase also offers number of services together with the home appliances that it
6. a Chase Appliance Store is an experienced home appliance dealer. Chase also offers number of services together with the home appliances that it sells. Assume that Chase sells dishwashers on a standalone basis. Chase also sells installation services and maintenance services for dishwashers. However, Chase does not offer installation or maintenance services to customers who buy dishwashers from other vendors. Pricing for dishwashers is as follows. Dishwasher only Dishwasher with Installation service Dishwasher with maintenance services Dishwasher with installation and maintenance services $1,200 1,450 1,500 1,700 In each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at $300. Additionally, the incremental amount charged by Chase for installation approximates the amount charged by independent third parties. Dishwashers are sold subject to a general right of return. If a customer purchases a dishwasher with installation and/or maintenance services, in the event Chase does not complete the service satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds $1,200. Required: a. Assume that a customer purchases a dishwasher with both installation and maintenance services for $1,700. Based on its experience, Chase believes that it is probable that the installation of the equipment will be performed satisfactorily to the customer. Assume that the maintenance services are priced separately. Identify the separate performance obligations related to the Chase revenue arrangement. b. Indicate the amount of revenue that should be allocated to the dishwasher, the installation, and to the maintenance contract. c. Prepare the necessary journal entry for Chase assuming that the deliver and the installation happen at the same time.
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