Oriole Company manufactures products ranging 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. Oriole has the following arrangement with Blue Spruce Inc. Blue Spruce purchases equipment from Oriole for a price of $1,104,000 and contracts with Oriole to install the equipment. Oriole charges the same price for the equipment irrespective of whether it does the installation or not. Using market data, Oriole determines installation service is estimated to have a standalone selling price of $46,000. The cost of the equipment is $630,000. Blue Spruce is obligated to pay Oriole the $1,104,000 upon the delivery of the equipment. Oriole delivers the equipment on June 1, 2025, and completes the installation of the equipment on September 30, 2025. 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. (a) Your Answer Correct Answer How should the transaction price of $1,104,000 be allocated among the performance obligations? (Do not round intermediate 5075
Oriole Company manufactures products ranging 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. Oriole has the following arrangement with Blue Spruce Inc. Blue Spruce purchases equipment from Oriole for a price of $1,104,000 and contracts with Oriole to install the equipment. Oriole charges the same price for the equipment irrespective of whether it does the installation or not. Using market data, Oriole determines installation service is estimated to have a standalone selling price of $46,000. The cost of the equipment is $630,000. Blue Spruce is obligated to pay Oriole the $1,104,000 upon the delivery of the equipment. Oriole delivers the equipment on June 1, 2025, and completes the installation of the equipment on September 30, 2025. 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. (a) Your Answer Correct Answer How should the transaction price of $1,104,000 be allocated among the performance obligations? (Do not round intermediate 5075
Chapter16: Accounting Periods And Methods
Section: Chapter Questions
Problem 44P
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Please help me figure out the standalone price for the equipment and installation and how you came to the price.
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