Case A

Entity M, a parts supplier, enters into contract with an OEM (i.e., Ms customer) for fixed consideration of $30 million to (1) construct equipment for the customer that M will use to make parts for the customer and (2) supply 30 million parts to the customer.

Legal title of the equipment transfers to the customer upon completion of the construction of the equipment (i.e., prior to M beginning production of the parts).

M is one of many companies that have the ability to both construct the equipment and subsequently produce the parts.

How many performance obligations does the contract have? Explain.