Problem #1 - Allocate Transaction Price

Meyer & Smith is a full-service technology company. They provide equipment, installation services as well as training. Customers can purchase any product or service separately or as a bundled package. Container Corporation purchased computer equipment, installation and training for a total cost of $144,000 on March 15, 2018. Estimated standalone fair values of the equipment, installation, and training are $90,000, $60,000, and $30,000 respectively. The transaction price allocated to equipment, installation and training is

Problem #1 - Allocate Transaction Price Meyer & Smith is a full-service technology company. They provide equipment, installation services as well as training. Customers can purchase any product or service separately or as a bundled package. Container Corporation purchased computer equipment, installation and training for a total cost of $144,000 on March 15, 2018. Estimated standalone fair values of the equipment, installation, and training are $90,000, $60,000, and $30,000 respectively. The transaction price allocated to equipment, installation and training is Revenue Allocated Equipment $ 2 Installation Services 3 Training ROUND TO NEAREST WHOLE DOLLAR Problem #2 - Variable Consideration Peabody Construction Company enters into a contract with a customer to build a warehouse for $250,000, with a performance bonus of $30,000 that will be paid based on the timing of completion. The amount of the performance bonus decreases by ($3,000) per week for every week beyond the agreed-upon completion date. The contract requirements are similar to contracts that Peabody has performed previously, and management believes that such experience is predictive for this contract. Management estimates that there is a 70% probability that the contract will be completed by the agreed- upon completion date, a 20% probability that it will be completed 1 week late, and only a 10% probability that it will be completed 2 weeks late. REQUIRED: How should Peabody account for this revenue arrangement? Probability Weighted Method 4 Total transaction Price $ Most Likely Outcome 5 Total transaction Price $