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PART B: PREPARE THE JOURNAL ENTRIES FOR THIS REVENUE ARRANGEMENT ON JUNE 1 2025 AND SEPTEMBER 1 2025 ASSUMING SUNLAND RECEIVES PAYMENT WHEN INSTALLATION IS
PART B: PREPARE THE JOURNAL ENTRIES FOR THIS REVENUE ARRANGEMENT ON JUNE 1 2025 AND SEPTEMBER 1 2025 ASSUMING SUNLAND RECEIVES PAYMENT WHEN INSTALLATION IS COMPLETED.
Sunland Company manufactures products ranging from simple automated machinery to complex systems containing numerous components. Unit selling prices range from $200,000 to $1,500,000 and are quoted inclusive of installation. The installation process does not involve changes to the features of the equipment and does not require proprietary information about the equipment in orde for the installed equipment to perform to specifications. Sunland has the following arrangement with Bramble Inc. - Bramble purchases equipment from Sunland for a price of $944,700 and contracts with Sunland to install the equipment. Sunland charges the same price for the equipment irrespective of whether it does the installation or not. Using market data, Sunland determines installation service is estimated to have a standalone selling price of $60,300. The cost of the equipment is $550,000. - Bramble is obligated to pay Sunland the $944,700 upon the delivery of the equipment. Sunland delivers the equipment on June 1, 2025, and completes the installation of the equipment on September 30, 2025. The equipment has a useful life of 10 years. Assume that the equipment and the installation are two distinct performance obligations which should be accounted for separately. How should the transaction price of $944,700 be allocated among the performance obligations? (Do not round intermediate calculations. Round final answers to 0 decimal places, e.g. 5,275.) Equipment $ Installation $Step by Step Solution
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