Comfort King Ltd. sells central air units to local residents. Jack Frost agreed to an arrangement with Comfort King to purchase a central air unit for $ 4,000 on May 1, 2021. In addition to the sale, the arrangement includes unit installation which was completed on May 20, 2021. Comfort King only provides installation services for its customers who purchase new units. Comfort King was immediately paid the agreed-upon price by Jack Frost.

Required:

Complete the following steps to determine if the appropriate criteria have been met for Comfort King to recognize revenue under the contract-based approach to revenue recognition. Be sure to conclude whether Comfort King can recognize the revenue and when it would be appropriate to do so.

1. Is there a contract?

2. What is the performance obligation?

3. What is the transaction price?

4. Is there a need to allocate the selling price?

5. Has the performance obligation been satisfied?