VACM Anerican College of the Middle East TAP 5 - 15% V2-M1 ACT340 Intermediate Accounting Part A - Exercises (70 points) Exercise 1 (58 points) Viva Company manufactures equipment. Unit selling prices range from $400,000 to $3,000,000 and are quoted exclusive of installation. The installation process does not involve changes to the features of the equipment and does not require proprietary information about the equipment in order for the installed equipment to perform to specifications. Viva has the following arrangement with Winkerbean SA. Winkerbean purchases equipment from Viva for a price of $2,000,000 and contracts with Viva to install the equipment Viva charges the same price for the equipment irrespective of whether it does the installation or not. Using market data, Viva determines installation service is estimated to have a standalone selling price of $100,000. The cost of the equipment is $1,200,000. Winkerbean is obliged to pay Viva the $2,000,000 upon the delivery and installation of the equipment Viva delivers the equipment on June 1, 2019 (transfer of control is complete), and completes the installation of the equipment on September 30, 2019. The equipment has a useful life of 10 years. Assume that the equipment and the installation are two distinct performance obligations which should be accounted for separately. Instructions a. According to standard on Revenue recognition entitled Revenue from Contracts with Customers, how should the transaction price of $2,000,000 be allocated among the service obligations? VACM Anerican College of the Middle East TAP 5 - 15% V2-M1 ACT340 Intermediate Accounting Part A - Exercises (70 points) Exercise 1 (58 points) Viva Company manufactures equipment. Unit selling prices range from $400,000 to $3,000,000 and are quoted exclusive of installation. The installation process does not involve changes to the features of the equipment and does not require proprietary information about the equipment in order for the installed equipment to perform to specifications. Viva has the following arrangement with Winkerbean SA. Winkerbean purchases equipment from Viva for a price of $2,000,000 and contracts with Viva to install the equipment Viva charges the same price for the equipment irrespective of whether it does the installation or not. Using market data, Viva determines installation service is estimated to have a standalone selling price of $100,000. The cost of the equipment is $1,200,000. Winkerbean is obliged to pay Viva the $2,000,000 upon the delivery and installation of the equipment Viva delivers the equipment on June 1, 2019 (transfer of control is complete), and completes the installation of the equipment on September 30, 2019. The equipment has a useful life of 10 years. Assume that the equipment and the installation are two distinct performance obligations which should be accounted for separately. Instructions a. According to standard on Revenue recognition entitled Revenue from Contracts with Customers, how should the transaction price of $2,000,000 be allocated among the service obligations
