Calibrate the equipment and software

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Reference no: EM13920587

On July 15, 2016, Ortiz & Co. signed a contract to provide Ever Fresh Bakery with an ingredient-weighing system for a price of $90,000. The system included finely tuned scales that fit into Ever Fresh's automated assembly line, Ortiz's proprietary software modified to allow the weighing system to function in Ever Fresh's automated system, and a one-year contract to calibrate the equipment and software on an as-needed basis. (Ortiz competes with other vendors who offer ongoing calibration contracts for Ortiz's systems.) If Ortiz was to provide these goods and services separately, it would charge $60,000 for the scales, $10,000 for the software, and $30,000 for the calibration contract. Ortiz delivered and installed the equipment and software on August 1, 2016, and the calibration service commenced on that date.

Assume that the scales, software and calibration service are viewed as one performance obligation. How much revenue will Ortiz recognize in 2016 for this contract?

$37,500

$90,000

$63,000

Reference no: EM13920587

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