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Find how alpha computers should record cash received

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On January 4, 2021 Alpha Computers signed a contract with Beta Protection, to install new computers at 40 work stations as well as connect to network all of the computers. Beta has also offered to provide service support for one year after the connection is complete. Alpha Computers uses the contact-based approach for revenue recognition.

Contract details include the following:

  • The total contract price is $120,000 which comprises of $60,000 for hardware, $40,000 for connection and $20,000 for one year service commencing March 2nd, 2021.
  • The contract requires Alpha Computers to deliver and install the computers by February 18th, 2021, and network connection completed by March 2nd, 2021.
  • Beta agrees to pay $20,000 deposit on signing, $50,000 upon the delivery of the computers and the balance after the network connection is complete, on March 2nd, 2021.

Question 1: Use the 5-step approach to revenue recognition under the contract-based approach and recommend how Alpha Computers should record cash received and when to recognize different types of revenues.

Reference no: EM132822948

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