Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Please help.Thank you Vaughn Company manufactures equipment. Vaughn's products range from simple automated machinery to complex systems containing numerous components. Unit selling prices range from
Please help.Thank you
Vaughn Company manufactures equipment. Vaughn's products range 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 order for the installed equipment to perform to specifications. Vaughn has the following arrangement with Winkerbean Inc. - Winkerbean purchases equipment from Vaughn for a price of $1,050,000 and contracts with Vaughn to install the equipment. Vaughn charges the same price for the equipment irrespective of whether it does the installation or not. The cost of the equipment is $590,000. - Winkerbean is obligated to pay Vaughn the $1,050,000 upon the delivery and installation of the equipment. Vaughn delivers the equipment on June 1, 2020, and completes the installation of the equipment on September 30, 2020. 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. Assuming Vaughn does not have market data with which to determine the standalone selling price of the installation services. As a result, an expected cost plus margin approach is used. The cost of installation is $34,900; Vaughn prices these services with a 30% margin relative to cost. How should the transaction price of $1,050,000 be allocated among the service obligations? (Do not round intermediate calculations. Round final answers to 0 decimal places.) Equipment $ Installation $Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started