Concord Company manufactures equipment. Concord’s products range from simple automated machinery to complex systems containing numerous components. Unit selling prices range from $200,000 to $1,500,000 and are quoted inclusive 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. Concord has the following arrangement with Winkerbean Inc.● Winkerbean purchases equipment from Concord for a price of $960,000 and contracts with Concord to install the equipment. Concord charges the same price for the equipment irrespective of whether it does the installation or not. Using market data, Concord determines installation service is estimated to have a standalone selling price of $47,000. The cost of the equipment is $550,000.● Winkerbean is obligated to pay Concord the $960,000 upon the delivery and installation of the equipment.Concord delivers the equipment on June 1, 2020, and completes the installation of the equipment on September 30, 2020. 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.(a)Your AnswerCorrect AnswerCorrect answer iconYour answer is correct.How should the transaction price of $960,000 be allocated among the service obligations? (Do not round intermediate calculations. Round final answers to 0 decimal places.)Equipment $ Installation $ b)Prepare the journal entries for Concord for this revenue arrangement on June 1, 2020 and September 30, 2020, assuming Concord receives payment when installation is completed. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

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Answered: Concord Company manufactures equipment.…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concord Company manufactures equipment. Concord’s products range from simple automated machinery to complex systems containing numerous components. Unit selling prices range from $200,000 to $1,500,000 and are quoted inclusive 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. Concord has the following arrangement with Winkerbean Inc.

●		Winkerbean purchases equipment from Concord for a price of $960,000 and contracts with Concord to install the equipment. Concord charges the same price for the equipment irrespective of whether it does the installation or not. Using market data, Concord determines installation service is estimated to have a standalone selling price of $47,000. The cost of the equipment is $550,000.
●		Winkerbean is obligated to pay Concord the $960,000 upon the delivery and installation of the equipment.

Concord delivers the equipment on June 1, 2020, and completes the installation of the equipment on September 30, 2020. 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.

(a)

Your Answer
Correct Answer

Correct answer iconYour answer is correct.

How should the transaction price of $960,000 be allocated among the service obligations? (Do not round intermediate calculations. Round final answers to 0 decimal places.)

Equipment		$
Installation		$

b)Prepare the journal entries for Concord for this revenue arrangement on June 1, 2020 and September 30, 2020, assuming Concord receives payment when installation is completed. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

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