Reference no: EM133154893

Question 1: On May 10, 2019, Cosmo Co. enters into a contract to deliver a product to Greig Inc. on June 15, 2019. Greig agrees to pay the full contract price of $2,000 on July 15, 2019. The cost of the goods is $1,300. Cosmo delivers the product to Greig on June 15, 2019, and receives payment on July 15, 2019. Prepare the journal entries for Cosmo related to this contract. Either party may terminate the contract without compensation until one of the parties performs.

Question 2: Hillside Company enters into a contract with Sanchez Inc. to provide a software license and 3 years of customer support. The customer-support services require specialized knowledge that only Hillside Company's employees can perform. How many performance obligations are in the contract?

Question 3: Destin Company signs a contract to manufacture a new 3D printer for $80,000. The contract includes installation which costs
$4,000 and a maintenance agreement over the life of the printer at a cost of $10,000. The printer cannot be operated without the installation. Destin Company as well as other companies could provide the installation and maintenance agreement. What are Destin Company's performance obligations in this contract?

Question 4: Ismail Construction enters into a contract to design and build a hospital. Ismail is responsible for the overall management of the project and identifies various goods and services to be provided, including engineering, site clearance, foundation, procurement, construction of the structure, piping and wiring, installation of equipment, and finishing. Does Ismail have a single performance obligation to the customer in this revenue arrangement? Explain.

Question 5: Nair A.G. enters into a contract with a customer to build an apartment building for €1,000,000. The customer hopes to rent apartments at the beginning of the school year and provides a performance bonus of €150,000 to be paid if the building is ready for rental beginning August 1, 2020. The bonus is reduced by €50,000 each week that completion is delayed. Nair commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following

completion outcomes:

Question 6: Referring to the revenue arrangement in BE18.6, determine the transaction price for the contract, assuming (a) Nair is only able to estimate whether the building can be completed by August 1, 2020, or not (Nair estimates that there is a 70% chance that the building will be completed by August 1, 2020), and (b) Nair has limited information with which to develop a reliable estimate of completion by the August 1, 2020, deadline.

(a) In this situation, Nair uses the most likely amount as the estimate - €1,150,000.

(b) When there is limited information with which to develop a reliable estimate of completion, then no revenue related to the incentive should be recognized until the uncertainty is resolved. Therefore, the gross profit is recognized at the completion of the contract.

Question 7: Presented below are three revenue recognition situations.
a. Yang sells goods to MTN for ¥1,000,000, payment due at delivery.
b. Yang sells goods on account to Grifols for ¥800,000, payment due in 30 days.
c. Yang sells goods to Magnus for ¥500,000, payment due in two installments, the first installment payable in 18 months and the second payment due 6 months later. The present value of the future payments is ¥464,000.
Indicate the transaction price for each of these situations and when revenue will be recognized.

(a) Yang would recognize revenue of ¥1,000,000 at delivery.

(b) Yang would recognize revenue of ¥800,000 at the point of sale.

(c) Yang would recognize revenue of ¥464,000 at the point of sale and recognize interest revenue over the payment period.