Question1 Monty Company manufactures equipment. Monty\'s products range from sim

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Question1 Monty Company manufactures equipment. Monty's products range from simple automated machinery to complex systems containing numerous components. Unit selling prices range from $200,000 to $1,500,000 and are quoted inclusive of installation. The installation process does not involve changes to the features of the equipment and does not require proprietary information about the equipment in order for the installed equipment to perform to specifications. Monty has the following arrangement with Winkerbean Inc. Winkerbean purchases equipment from Monty for a price of $980,000 and contracts with Monty to install the equipment. Monty charges the same price for the equipment irrespective of whether it does the installation or not. Using market data, Monty determines installation service is estimated to have a standalone selling price of $50,000. The cost of the equipment is $600,000 Winkerbean is obligated to pay Monty the $980,000 upon the delivery and installation of the equipment Monty delivers the equipment on June 1, 2017, and completes the installation of the equipment on September 30, 2017. The equipment has a useful life of 10 years. Assume that the equipment and the installation are two distinct performance obligations which should be accounted for separately. Your answer is correct. How should the transaction price of $980,000 be allocated among the service obligations? (Do not round intermediate calculations. Round final answers to 0 decimal places.) Equipment Installation 932427 47573

Explanation / Answer

b)

Date Account Titles and Explanation Debit Credit June 1,2017 Accounts Receivable 980000 Sales Revenue 932427 Unearned Service Revenue 47573 (To Record Sales) June 1,2017 Cost of Goods Sold 600000 Inventory 600000 (To record cost of goods sold) Sep 30,2017 Unearned Service Revenue 47573 Service Revenue 47573 (To record service revenue) Sep 30,2017 Cash 980000 Accounts Receivable 980000

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