saxon has the following arrangement with dana Inc dana purchases equipment from saxon for a price of $1,200 and contracts with saxon to install the equipment. saxon charges the same price for the equipment irrespective of whether it does the installation or not. Using market data, saxon determines installation service is estimated to have a fair value of $50.

The cost of the equipment is $750. dana is obligated to pay saxon the $1,200 upon the delivery and installation of the equipment. saxon delivers the equipment on June 1, 20XX, and completes the installation of the equipment on September 30, 20XX.. Assume that the equipment and the installation are two distinct performance obligations which should be accounted for separately.

Instructions:

(a) How should the transaction price of $1,200 be allocated among the service obligations?

(b) Prepare the journal entries for saxon for this revenue arrangement in 2021 assuming saxon receives full payment when installation is completed.