Question

$1025 installation and/or maintenance services, in the event Appliance Center does not complete the service satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds $800. Instructions (a) Assume that a customer purchases an oven with both installation and maintenance services for $1,000. Based on its experience, Appliance Center believes that it is probable that the installation of the equipment will be performed satisfactorily to the customer. Assume that the maintenance services are priced separately (i.e., the three components are distinct). Identify the separate performance obligations related to the Appliance Center revenue arrangement. (b) Indicate the amount of revenue that should be allocated to the oven, the installation, and to the maintenance contract. Oven $800 \quad (800 \div 1025) \times 1000 = 780 Installation $50 \quad (50 \div 1025) \times 1000 = 49 Maintenance $175 \quad (175 \div 1025) \times 1000 = 171 service reu (installation) \quad 780 unearned service rev (maintenance) \quad 171 Sales reverve \quad 780 #3. Sales with Returns On March 10, 2017, Steele Company sold to Barr Hardware 200 tool sets at a price of $50 each (cost $30 per set) with terms of n/60 f.o.b. shipping point. Steele allows Barr to return any

          $1025
installation and/or maintenance services, in the event Appliance Center does not complete the
service satisfactorily, the customer is only entitled to a refund of the portion of the fee that
exceeds $800.
Instructions
(a) Assume that a customer purchases an oven with both installation and maintenance services
for $1,000. Based on its experience, Appliance Center believes that it is probable that the
installation of the equipment will be performed satisfactorily to the customer. Assume that the
maintenance services are priced separately (i.e., the three components are distinct). Identify the
separate performance obligations related to the Appliance Center revenue arrangement.
(b) Indicate the amount of revenue that should be allocated to the oven, the installation, and to
the maintenance contract.
Oven $800 \quad (800 \div 1025) \times 1000 = 780
Installation $50 \quad (50 \div 1025) \times 1000 = 49
Maintenance $175 \quad (175 \div 1025) \times 1000 = 171
service reu (installation) \quad 780
unearned service rev (maintenance) \quad 171
Sales reverve \quad 780
#3. Sales with Returns
On March 10, 2017, Steele Company sold to Barr Hardware 200 tool sets at a price of $50 each
(cost $30 per set) with terms of n/60 f.o.b. shipping point. Steele allows Barr to return any

1025
installation and/or maintenance services, in the event Appliance Center does not complete the
service satisfactorily, the customer is only entitled to a refund of the portion of the fee that
exceeds800.
Instructions
(a) Assume that a customer purchases an oven with both installation and maintenance services
for 1,000. Based on its experience, Appliance Center believes that it is probable that the
installation of the equipment will be performed satisfactorily to the customer. Assume that the
maintenance services are priced separately (i.e., the three components are distinct). Identify the
separate performance obligations related to the Appliance Center revenue arrangement.
(b) Indicate the amount of revenue that should be allocated to the oven, the installation, and to
the maintenance contract.
Oven800 (800 ÷1025) ×1000 = 780
Installation 50 (50 ÷ 1025) × 1000 = 49
Maintenance175 (175 ÷1025) ×1000 = 171
service reu (installation) 780
unearned service rev (maintenance) 171
Sales reverve 780
#3. Sales with Returns
On March 10, 2017, Steele Company sold to Barr Hardware 200 tool sets at a price of 50 each
(cost30 per set) with terms of n/60 f.o.b. shipping point. Steele allows Barr to return any

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