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How does the codification define a performance obligation

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Reference no: EM132958239

Question - Turbo Clean industries makes and sells a high end dish washing machine. Turbo clean offers its Platinum model, for a price of $1,000. The price includes the washing machine, installation by the manufacturer, and a 5 year extended warranty. The washing machine can be purchased for $850, but the customer would need to install it themselves or find an installer to do it for them. Turbo clean states that if they do not perform the installation any warranty they offer is null and void, as improper installation can cause the dishwasher to fail through no fault of the manufacturer. Private plumbers can install the turbo clean machine at a cost of $100, and a home warranty company can provide a 5 year warranty at a cost of $200. Turbo Clean needs to know how to recognize revenue for the sale of one unit with their installation and warranty for $1000 on January 1, 2020.

Required -

a. Provide the numerical reference to the appropriate part of the Accounting Standards Codification (ASC) that describes the 5 step revenue recognition process recently implemented by the FASB? Copy and paste the 5 step process found in the codification.

b. How does the codification define a "Performance obligation," provide appropriate numerical reference for your answer

c. Using the relevant guidance form the codification, identify:

-The performance obligation or obligations that may be present in the contract, explain why each obligation you identify should be a separate performance obligation.

-What is the total consideration paid in the contract.

-Allocate the consideration to the performance obligatons.

-What journal entries would Turbo Clean record for this sale in the year 2020.

-What journal entries would Turbo Clean record for this sale in the year 2021.

Reference no: EM132958239

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