BE18.1 (LOL) Leno Computers manufactures tablet computers for sale to retailers such as Fallon Electronics, Leno sold and delivered 200 tablet computers to Fallon for $20,000 on January 5, 2022. Fallon agreed to pay for the 200 tablet computers within 30 days. Fallon has a good credit rating and should have no difficulty in making payment to Leno. (a) Explain whether a valid contract exists between Leno Computers and Fallon Electronics. (b) Leno Computers has not yet delivered the tablet computers to Fallon Electronics. What might cause a valid contract not to exist between Leno and Fallon? BE18.2 (LOD) On May 10, 2022, Cosmo Co. enters into a contract to deliver a product to Greig Inc. on June 15, 2022. Greig agrees to pay the full contract price of $2,000 on July 15, 2022. The cost of the goods is $1.300. Cosmo delivers the product to Greig on June 15, 2022, and receives payment on July 15, 2022. Prepare the journal entries for Cosmo related to this contract. Either party may terminate the contract without compensation until one of the parties performs. BE18.3 (01. 2) Hillside Company enters into a contract with Sanchez Inc. to provide a software license and 3 years of customer support. The customer support services require specialized knowledge that only Hillside Company's employees can provide. How many performance obligations are in the contract? BE18.4 (LO2) Destin Company signs a contract to manufacture a new 3D printer for $80,000. The contract includes installation which costs $4.000 and a maintenance agreement over the life of the printer at a cost of $10,000. The printer cannot be operated without the installation. Destin Company as well as other companies could provide the installation and maintenance agreement. What are Destin Company's performance obligations in this contract? BE18.5 (LO 2) Ismail Construction enters into a contract to design and build a hospital. Ismail is responsible for the overall management of the project and identifies various goods and services to be provided, including engineering, site clearance, foundation, procurement, construction of the structure, piping and wiring, installation of equipment, and finishing. Does Ismail have a single performance obligation to the customer in this revenue arrangement? Explain. BE18.6 (LO2) Nair A.G. enters into a contract with a customer to build an apartment building for 1,000,000. The customer hopes to rent apartments at the beginning of the school year and provides a performance bonus of 150,000 to be paid if the building is ready for rental beginning August 1, 2023. The bonus is reduced by 50,000 each week that completion is delayed. Nair commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: Completed by Probability August 1, 2023 70% August 8, 2023 August 15, 2023 After August 15, 2023 5 Determine the transaction price for this contract. 20 5
