REVENUE RECOGNITION

Black Store is an experienced home appliance dealer. Black Store also offers a number of services along with the household appliances it sells. Assume that the Black Store sells dishwashers on a standalone basis. Black Store also sells dishwasher installation and maintenance services. However, Black Store does not offer installation or maintenance services to customers who purchase dishwashers from other vendors. Prices for dishwashers are as follows :

Dishwasher 1,140

Dishwasher with installation service 1,260

Dishwasher with maintenance services 1,380

Dishwasher with installation and maintenance services 1,450

In each instance where maintenance services are provided, maintenance services have a standalone price of 240. In addition, the additional amount charged by the Black Store for installation is close to the amount charged by an independent third party. Dishwasher is sold with return rights. If the customer purchases a dishwasher with installation and/or maintenance services, if the Black Store does not complete the service satisfactorily, the customer is only entitled to a partial refund in excess of 1,140.

Instructions :

(a) Assume that a customer purchases a dishwasher with installation and maintenance services for 1,450. Based on its experience, Black Store believes that it is very likely that the installation of the equipment will be carried out satisfactorily to the customer. Assume that maintenance services are priced separately. Identify separate performance obligations related to Appliance Store revenue.

(b) Determine the amount of revenue to be allocated to dishwashers, installation services, and to maintenance services.

(c) Prepare the required journal entries for the Black Store.