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Wilson, Inc. sells, installs and maintains manufacturing equipment. The contract with its customers to purchase equipment includes installation and includes a one-year maintenance contract, renewable
Wilson, Inc. sells, installs and maintains manufacturing equipment. The contract with its customers to purchase equipment includes installation and includes a one-year maintenance contract, renewable for up to five years. Because the useful life of the equipment is expected to be five years, the company can reasonably expect its customers to renew the maintenance contracts for the full five years. Wilson records the cost of installation of the equipment as a capitalized contract and amortizes the cost over the five-year maintenance agreement period. Because of a defect in model A5403, Wilson anticipates that many of its customers will trade in the model and not renew the maintenance contracts. Wilson, Inc. should: 1.25 points (8 01:30:56 Multiple Choice do nothing until the customers fail to renew the maintenance contracts. write down the contract asset and recognize a loss equal to the difference between the amount of maintenance contracts expected and the carrying amount. write down the full amount received for maintenance contracts for the full five years. write down the full amount of Installation costs
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