Question
Crankshaft Company manufactures equipment. Crankshaft has the following arrangement with Winkerbean Inc. Winkerbean purchases equipment from Crankshaft for a price of $1,000,000 and contracts with
Crankshaft Company manufactures equipment. Crankshaft has the following arrangement with Winkerbean Inc.
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Winkerbean purchases equipment from Crankshaft for a price of $1,000,000 and contracts with Crankshaft to install the equipment. Crankshaft charges the same price for the equipment irrespective of whether it does the installation or not. Using market data, Crankshaft determines installation service is estimated to have a fair value of $50,000. The cost of the equipment is $600,000.
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Winkerbean is obligated to pay Crankshaft the $1,000,000 upon the delivery and installation of the equipment.
Crankshaft delivers the equipment on June 1, 2017, and completes the installation of the equipment on September 30, 2017. Assume that the equipment and the installation are two distinct performance obligations.
How should the transaction price of $1,000,000 be allocated among the service obligations?
Round to whole number (no decimals)
Equipment =
Installation =
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