Question
On July 15, 2016, Ortiz & Co. signed a contract to provide EverFresh Bakery with an ingredient-weighing system for a price of $99,600. The system
On July 15, 2016, Ortiz & Co. signed a contract to provide EverFresh Bakery with an ingredient-weighing system for a price of $99,600. The system included finely tuned scales that fit into EverFreshs automated assembly line, Ortizs proprietary software modified to allow the weighing sytem to function in EverFreshs automated system, and a one-year contract to calibrate the equipment and software on an as-needed basis. (Ortiz competes with other vendors who offer ongoing calibration contracts for Ortizs systems.) If Ortiz was to provide these goods and services separately, it would charge $68,000 for the scales, $10,000 for the software, and $22,000 for the calibration contract. Ortiz delivered and installed the equipment and software on August 1, 2016, and the calibration service commenced on that date. |
Assume that the scales, software and calibration service are all separate performance obligations. How much revenue will Ortiz recognize in 2016 for this contract? |
$77,688
$0
$86,818
$99,600
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