Identifying the Number of Performance Obligations

Answer the following requirements for each separate case that involves contracts with performance obligations.

a. A retailer enters into a contract with a customer to sell an electric toothbrush, bundled with the replacement parts for the toothbrush. The retailer also sells the replacement parts and toothbrushes separately. The customer can use the toothbrush without the replacement parts, but the replacement parts have no use without the toothbrush. How many performance obligations exist in the bundling of the toothbrush and the replacement parts?

b. A contractor enters into a revenue contract to build a house for a customer. The contractor is responsible for the overall management of the project and identifies various goods and services that are provided, including architectural design, site preparation, construction of the home, plumbing and electrical services, painting, and carpentry. The contractor regularly sells these goods and services individually to customers. For example, the contractor can be contracted to paint a home. How many performance obligations are included in the contract to build the home assuming that the goods and services provided are limited to the descriptive list provided above?

c. Gateway Inc. enters into a contract with a customer to provide a license for use of new accounting software, installation services, and three years of subsequent customer support. The customer purchased the accounting software, scheduled installation services one week later, and is guaranteed customer support for three years beyond the software purchase date. The installation services require some configuration but no serious modifications. External consultants would have the knowledge to perform similar services (installation and customer support). The subsequent customer support does not significantly affect the softwares benefit or value to the customer. How many performance obligations are included in this revenue contract?

d. Assume the same circumstances in part c above except that Gateway Inc. is supplying highly customized software, where the customer has a number of requests for changes to the standard software to accommodate industry specific reporting requirements. The customization affects both the software product and the installation process. How many performance obligations are included in this revenue contract?

The options for all 4 questions are these :

one performance obligation

two performance obligations

three performance obligaitons

four performance obligations

no performance obligations