Reference no: EM133125187
Question - Company prepares monthly financial statements. Company sells precision equipment. They also sell service agreements for calibrating precision equipment (both to their customers and the public). Machine X normally sells for $54,000. A 12-month agreement to calibrate the equipment on a monthly basis normally sells for $6,000 ($500 per month).
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In January Company sells a customer a package that includes MachineX and the calibration agreement. The total contract price is $48,000.
The equipment is delivered to the customer in January.
The calibration services will be provided over 12 months beginning in February.
There are 2 performance obligations in this package, the equipment sale and the calibration agreement.
Required -
1. What amount is allocated to the equipment sale performance obligation?
2. What amount is allocated to the calibration agreement performance obligation?
3. How much revenue is recognized in January related to this customer's contract?
4. How much revenue is recognized in February related to this customer's contract?
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