a) Referring to Case Requirement 3 ai, allocate the contract price of $245,000 to each performance obligation. Explain in your own words and provide citation from ASC 606.

b) For each performance obligation in Case Requirement 3ai, should TSA recognize revenue at a point in time or over time? Explain in your own words and provide citation from ASC 606.

Requirement 3

Assume that TSA, Inc. entered into a contract with client Anon for $230,000 on January 1, Year 1, to transfer a software license and an additional $15,000 for installation of the software. The license entitles Anon to use the software in its current form over an unlimited period and does not include updates. Two years of customer support come free with the license. In recent stand-alone contracts with other customers for the same software, TSA has charged $200,000 for the software license,

$40,000 for two-year customer support, and $20,000 for installation. The software is usable without customer support from TSA and it can be installed by other vendors. The installation is expected to take 250 hours, of which 150 hours will be required in Year 1 and the remainder in Year 2. The entire fee of $245,000 is collected on the contract date. Base your answers on the current ASC 606.

1. Determine the number of performance obligations, and the contract price to be allocated to each, in the following situations:
   1. Problem 3ai: The installation service does not modify the software.