BPP Company sells prefabricated pools that cost $80,000 to customers for $139,900. The sales price includes an installation fee, which is valued at $20,000. Also, the sales price includes 6 months of pool service (i.e., cleaning, chemicals, etc.), which is valued at $150/month. Pool services begin immediately following the installation of the pool. The fair value of the pool is $132,000. Both the installation of the pool and the pool services can be done by other, readily available, third parties. The installation of the pool is expected to take 3 months to complete.

BPP enters into a contract on 1/1/2023 with a homebuilder, Nocatee Development Corporation (NDC), whereby NDC purchases 4 of the prefabricated pools at the sales price of $139,900 for each pool. These pools will be delivered, installed and serviced by BPP at NDCs 4 new model homes being built at its latest housing development in northeast St. Johns County. BPP is required to deliver and install one pool per quarter during 2023. Delivery and installation of the first pool will begin on 1/1/2023.

The contract specifies that NDC will pay 3/4 of the sales price for each pool at the beginning of each quarter when each pool installation is begun. NDC will pay the remaining sales price when the pool is completely installed. All payments were made timely by NDC during 2023.

BPP delivers the pools on the first day of each new quarter (e.g., 1/1, 4/1, etc.) and installation begins immediately thereafter.

BPP was successful at delivering and installing each pool in its respective 2023 quarter with completion dates for each pool on 3/31, 6/30, 9/30 and 12/31.

BPP began pool services for each pool once it was fully installed. NDC did not extend these services beyond the 6 month period provided in the contract.

Requirements:

A) Using any format, develop a revenue allocation analysis for each of the performance obligations stated in the above arrangement for one pool only.

B) record journal entries for BPP applicable to the period April through June 30, 2023. Be very carefultake special care to consider this timeframe.

C) Prepare a discussion (i.e. a paragraph of 3-5 sentences) that would describe the impact, if any, from the following alteration (bolded sentences) to the sales transaction/contract. In addition, as a part of the contract, BPP will receive a potential performance bonus of:

$20,000 if the delivery and the installation of all four pools are all completed by June 30, 2023.

Or

$10,000 if the delivery and the installation of all four pools are all completed by September 30, 2023.

On January 1, 2023, BPP estimates a 75% chance of successfully completing the pools by June 30, 2023 and a 25% chance of completing the pools by September 30, 2023. BPP does not predict a most likely outcome as of 1/1/2023. BPP has a second crew available to accelerate the delivery and installation of the 4 pools. BPP has successfully completed contracts with similar accelerated due dates with previous home developers.

The discussion should address the performance bonus as a separate performance obligation (interdependent or independent), estimating variable consideration and the timing recording such, and allocating transaction price to the performance obligations. Quantification of all amounts should be included in the discussion.