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What amount of revenue should panarin associate

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Reference no: EM132937828

Panarin Company entered into two contracts on the same date with Hjalmarsson Corporation. Panarin has provided the following analysis of price and cost for the contracts:

                               Contract A            Contract B

Contract price             $125,000                  $80,000

Cost of related goods       70,000                   55,000

Gross profit (loss)            $55,000                 $25,000

Hjalmarsson, the customer, may cancel both contracts if either of them is not fulfilled by Panarin in a timely manner. Stand-alone prices are typically $120,000 for the goods in Contract A and $80,000 for the goods in Contract B.

Required:

Problem 1: Should the two contracts be combined for purposes of applying the five-step revenue recognition model?

Problem 2: What amount of revenue should Panarin associate with each of the contracts?

Problem 3: When should revenue be recognized on each of the contracts?

Reference no: EM132937828

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