Question
What is the proper way to recognize the revenue for Insight, Inc. ? Over time? What if the allocation is not given, and standalone price
What is the proper way to recognize the revenue for Insight, Inc. ? Over time? What if the allocation is not given, and standalone price is unknown? Please help me to find the proper way to recognize the revenue from the contract . The case is below
Insight, Inc. ("Insight"), a U.S. publicly traded company with a December 31 year-end, manufactures and sells the Bon Laser ("Bon") to hospitals throughout the United States. Bon is used in patient examinations to analyze vision problems and to perform surgical procedures on patients' eyes ranging from cataract removal to corneal transplants.
Prior to shipping a Bon Laser from the factory, Insight performs extensive factory tests to evaluate whether it meets the agreed-upon specifications of the equipment. After delivery of the laser to the customer, Insight installs it, which involves by adjusting, calibrating, and testing the mechanical operation of the equipment, and configuring the embedded software.
Proper installation of a Bon Laser at the customer's site is critical to ensure that all its functions will operate according to Insight's published specifications and that the Bon Laser is calibrated and configured to the customer's computer network.
In February 2019, General Hospital signed a contract with Insight for $950,000 for the purchase of a Bon Laser. The contract states that Insight will both deliver and install the Bon Laser or "Bon". The contract also states that the delivery of Bon to General Hospital will be made on December 10, 2019, with installation scheduled to be completed on January 2, 2020. The contract further states that the installation will occur during several onsite visits from the delivery date through its completion. Prior to installation, General Hospital will be able to use Bon for low level analytical functions. There is no general right of return for sales of the Bon Laser.
For all prior sales, Insight has recognized the entire sales price at the time the contract is signed.
I need an advice on proper revenue recognition from the sale to General Hospital.
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