problem 74

Chapter 7 Revenue Recognition 7-42 n August 1, 2020, a retailer enters into an arrangement with a customer to sell 10 items for $2,000 ($200 per Exercise 7-74 ) over a four-month period. During August and September of 2020, the retailer sold ofthe IO items to the gag- esomer. On October 1, 2020, the contract is modified to include 8 additional items, with a transaction price of Under a Contract $250 per item. Because the additional items have added features, the standalone selling price of the additional inems is $250 per item at the date of the contract modification. Required Modfication LO7 4. Describe how the retailer should account for the contract modification. b. Determine the amount of revenue per unit to be recognized for the remaining units (the 5 under the original contract and the 8 under the contract modification) to be sold under the revenue contract(s) Smith Manufacturing Inc. sells $250,000 of equipment to a customer on August 15, 2020, and the equipment is Exercise 775 prepared to ship on that date. However, Smith Manufacturing Inc. receives a last minute request from the cus- Contract Classication tomer lo hold the shipment for 15-45 days due to delay in construction of a facility where the new equipment and Recogntio will be installed. The equipment is customized for the customer, and it cannot be used for any other purposes Smith bills the customer on August 15, 2020, with payment due in 30 days. The equipment was shipped to the customer on September 8, 2020 Determining Revenue . Timing LO8 Required d. How would this type of revenue contract be classified? Explain b. At what date is revenue recognized by Smith Manufacturing for the sale of equipment? se 7-76 ,2020, Miller Inc. sells equipment to Smith Inc. for $55,000. As stipulated in the revenue contract Under pteret %. har 1l 020, for $58,850. The relevant interest rate is L08 Chapter 7 Revenue Recognition 7-42 n August 1, 2020, a retailer enters into an arrangement with a customer to sell 10 items for $2,000 ($200 per Exercise 7-74 ) over a four-month period. During August and September of 2020, the retailer sold ofthe IO items to the gag- esomer. On October 1, 2020, the contract is modified to include 8 additional items, with a transaction price of Under a Contract $250 per item. Because the additional items have added features, the standalone selling price of the additional inems is $250 per item at the date of the contract modification. Required Modfication LO7 4. Describe how the retailer should account for the contract modification. b. Determine the amount of revenue per unit to be recognized for the remaining units (the 5 under the original contract and the 8 under the contract modification) to be sold under the revenue contract(s) Smith Manufacturing Inc. sells $250,000 of equipment to a customer on August 15, 2020, and the equipment is Exercise 775 prepared to ship on that date. However, Smith Manufacturing Inc. receives a last minute request from the cus- Contract Classication tomer lo hold the shipment for 15-45 days due to delay in construction of a facility where the new equipment and Recogntio will be installed. The equipment is customized for the customer, and it cannot be used for any other purposes Smith bills the customer on August 15, 2020, with payment due in 30 days. The equipment was shipped to the customer on September 8, 2020 Determining Revenue . Timing LO8 Required d. How would this type of revenue contract be classified? Explain b. At what date is revenue recognized by Smith Manufacturing for the sale of equipment? se 7-76 ,2020, Miller Inc. sells equipment to Smith Inc. for $55,000. As stipulated in the revenue contract Under pteret %. har 1l 020, for $58,850. The relevant interest rate is L08