Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Carla Vista Company manufactures equipment. Carla Vista's products range from simple automated machinery to complex systems containing numerous components. Unit selling prices range from $251,000

image text in transcribedimage text in transcribed Carla Vista Company manufactures equipment. Carla Vista's products range from simple automated machinery to complex systems containing numerous components. Unit selling prices range from $251,000 to $1,510,000, and are quoted inclusive of installation. The installation process does not involve changes to the features of the equipment to perform to specifications. Carla Vista has the following arrangement with Pharoah Inc. - Pharoah purchases equipment from Carla Vista on May 2, 2023, for a price of $990,000 and contracts with Carla Vista to install the equipment. Carla Vista charges the same price for the equipment irrespective of whether it does the installation or not. The cost of the equipment is $700,000. - Pharoah is obligated to pay Carla Vista the $936,000 on delivery of the equipment and the balance on the completion of the installation Carla Vista delivers the equipment on June 1,2023, and completes the installation of the equipment on September 30, 2023. Assume that the equipment and the installation are two distinct performanc obligations that should be accounted for separately. Carla Vista does not have market data from which to determine the stand-alone selling price of the installation services. As a result, an expected cost plus margin approach is used. The cost of installation is $33,000; Carla Vista prices these services with a 25% margin relative to cost. Allocate the transaction price of $990,000 among the performance obligations of the contract. Assume Carla Vista follows IFRS. (Round percentage allocations to 2 decimal places, e.g. 12.25% and final answers to 0 decimal places, e.g. 5,275.) Delivery equipment Installation $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Alan Melville

2nd Edition

0273634399, 978-0273634393

More Books

Students also viewed these Accounting questions

Question

How is an allocation rate determined? How is an allocation made?

Answered: 1 week ago