Question
Stossel Company sells 300 units for $200 each to Liberty Inc. for cash. Stossel allows Liberty to return any unused product within 30 days and
Stossel Company sells 300 units for $200 each to Liberty Inc. for cash. Stossel allows Liberty to return any unused product within 30 days and receive a full refund. The cost of each product is $120. To determine the transaction price, Stossel decides that the approach that is most predictive of the amount of consideration to which it will be entitled is the most likely amount. Using the most likely amount, Stossel estimates that ten units will be returned, the costs of recovering the units will be immaterial, and the returned units are expected to be resold at a profit. What amount of refund liability should Stossel record at the time of sale?
Sufjan Company has a contract to sell 200 units to a customer for $14,000. After 140 units have been delivered, Sufjan modifies the contact by promising to deliver 30 more units for an additional $60 per unit (the standalone selling price at the time of the contract modification). What is the total revenue after the modification?
Mocha purchases equipment, installation, and training from Lynne for a price of $1,000,000 and chooses Lynne to do the installation. Lynne charges the same price for the equipment irrespective of whether it does the installation or not. (Some companies do the installation themselves because they either prefer their own employees to do the work or because of relationships with other customers.) The price of the installation service is estimated to have a fair value of $20,000.
The fair value of the training sessions is estimated at $40,000. Other companies can also provide these training services. | ||
Mocha is obligated to pay Lynne the $1,000,000 upon the delivery and installation of the equipment. | ||
Lynne delivers the equipment on May 1, 2015, and completes the installation of the equipment on July 1, 2015. Training related to the equipment starts once the installation is completed and lasts for 1 year. The equipment has a useful life of 8 years. |
What amount is recorded by Lynne as Unearned Service Revenue at 7/1/15?
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