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Individual Homework #2 Page 7 of 17 Scenario #6: Bow Tie Pathetic Industries (8 points) On March 1, 2020, Bow Tie Pathetic Industries signed a contract with No Backbone Mfg. Corp. to: Dellver and install a computer network by March 31, 2020 Provide monthly technical services on the network for one year beginning on April 1, 2020. The total contract price was $1,500,000 due in full at the time of the installation on the network. Bow Tie Pathetic Industries estimated that of the $1,500,000 total contract price, $1,380,000 related to the computer network with the remaining $120,000 relating to the maintenance and repairs services. Bow Tie Pathetic Industries delivered and installed the computer network on March 31, 2020. Bow Tie Pathetic Industries received a check for $1,500,000 from No Backbone Mfg. Corp. on March 31, 2020 as required under the contract. Bow Tie Pathetic Industries performed the monthly technical services on the network beginning on April 1, 2020 through March 31, 2021 as required by the contract. (2 points per box = 8 points) 2020 2021 a) How much sales revenue was Bow Tie Pathetic Industries allowed to recognize from the contract with No Backbone Mfg. Corp. in its 2020 and 2021 GAAP comprehensive income statements? (2 points) b) How much technical services revenue was Bow Tie Pathetic Industries allowed to recognize from the contract with No Backbone Mfg. Corp. in its 2020 and 2021 GAAP comprehensive income statements? (4 points) SUPPORTING COMPUTATION REQUIRED: What amount did Bow Tie Pathetic Industries report as deferred revenue from No Backbone Mfg. Corp.in its GAAP balance sheet at December 31, 2020? (2 points) SUPPORTING COMPUTATION OR BRIEF EXPLANATION REQUIRED: Individual Homework #2 Page 8 of 17 Scenario #7: Higgins Disaster Planning (6 points) On November 15, 2020, Higgins Disaster Planning signed a contract to develop a disaster recovery plan for with Amalgamated De Luca Inc. and its computing facilities for a fee of $2,000,000. Under the contract, Higgins Disaster Planning received a check for $500,000 on November 15 as a retainer. The Company will receive the remaining $1,500,000 payment upon completing the final plan by no later than January 31, 2021 Higgins Disaster Planning estimated that it will need a total of 8,400 worker-hours to complete the development of the plan. By December 31, 2020, Higgins Disaster Planning used 5,040 worker-hours on the project to develop the plan. Identify the items and their amounts reported by Higgins Disaster Planning in its 2020 GAAP financial statements relative to its contract with Amalgamated De Luca Inc.: (2 points per box = 6 points) 2020 Income Statement 2020 Statement of Cash Flows Balance Sheet @ 12/31/2020 SUPPORTING COMPUTATIONS REQUIRED: Individual Homework #2 Page 7 of 17 Scenario #6: Bow Tie Pathetic Industries (8 points) On March 1, 2020, Bow Tie Pathetic Industries signed a contract with No Backbone Mfg. Corp. to: Dellver and install a computer network by March 31, 2020 Provide monthly technical services on the network for one year beginning on April 1, 2020. The total contract price was $1,500,000 due in full at the time of the installation on the network. Bow Tie Pathetic Industries estimated that of the $1,500,000 total contract price, $1,380,000 related to the computer network with the remaining $120,000 relating to the maintenance and repairs services. Bow Tie Pathetic Industries delivered and installed the computer network on March 31, 2020. Bow Tie Pathetic Industries received a check for $1,500,000 from No Backbone Mfg. Corp. on March 31, 2020 as required under the contract. Bow Tie Pathetic Industries performed the monthly technical services on the network beginning on April 1, 2020 through March 31, 2021 as required by the contract. (2 points per box = 8 points) 2020 2021 a) How much sales revenue was Bow Tie Pathetic Industries allowed to recognize from the contract with No Backbone Mfg. Corp. in its 2020 and 2021 GAAP comprehensive income statements? (2 points) b) How much technical services revenue was Bow Tie Pathetic Industries allowed to recognize from the contract with No Backbone Mfg. Corp. in its 2020 and 2021 GAAP comprehensive income statements? (4 points) SUPPORTING COMPUTATION REQUIRED: What amount did Bow Tie Pathetic Industries report as deferred revenue from No Backbone Mfg. Corp.in its GAAP balance sheet at December 31, 2020? (2 points) SUPPORTING COMPUTATION OR BRIEF EXPLANATION REQUIRED: Individual Homework #2 Page 8 of 17 Scenario #7: Higgins Disaster Planning (6 points) On November 15, 2020, Higgins Disaster Planning signed a contract to develop a disaster recovery plan for with Amalgamated De Luca Inc. and its computing facilities for a fee of $2,000,000. Under the contract, Higgins Disaster Planning received a check for $500,000 on November 15 as a retainer. The Company will receive the remaining $1,500,000 payment upon completing the final plan by no later than January 31, 2021 Higgins Disaster Planning estimated that it will need a total of 8,400 worker-hours to complete the development of the plan. By December 31, 2020, Higgins Disaster Planning used 5,040 worker-hours on the project to develop the plan. Identify the items and their amounts reported by Higgins Disaster Planning in its 2020 GAAP financial statements relative to its contract with Amalgamated De Luca Inc.: (2 points per box = 6 points) 2020 Income Statement 2020 Statement of Cash Flows Balance Sheet @ 12/31/2020 SUPPORTING COMPUTATIONS REQUIRED