Required:For each of the following scenarios, determine if a separate contract is created by the modification and describe theaccounting for revenue recognition.a. Entity Suppliers agrees to increase the number of cartridges by 50 units at aprice of $1,250 each which is equal to the estimated stand-alone selling pricefor the cartridges.b. Entity Suppliers agrees to increase the number of cartridges by 50 units at theoriginal contract price of $1,000 each which is significantly below theestimated stand-alone selling price for the cartridges.c. Same as (b) except Entity Suppliers determines the contract price of $1,000 isequal to the estimated stand-alone selling price for the cartridges after givingconsideration to any adjustments that would be made based on the facts andcircumstances. Entity Suppliers contracts with its customer to deliver an imaging device and 50 replacement cartridges to be usedwith the device. The contract price for the device is $100,000, and the cartridges, which are expected to bedelivered over six months, are priced at $1,000 each. The stand-alone selling price for the device is $100,000, andthe stand-alone selling price for each replacement cartridge is $1,250. The allocation of the transaction price basedon the relative selling prices is as follows:Imaging deviceCartridgesStandalone sellingprice$100,00062,500$162,500% of total61,5%38.5%100%Allocation of thecontract prices$92,25057,750$150,000After Entity Suppliers has delivered the imaging device and 40 cartridges, the parties agree to modify the contractto increase the total number of cartridges.Required:For each of the following scenarios, determine if a separate contract is created by the modification and describe theaccounting for revenue recognition.a. Entity Suppliers agrees to increase the number of cartridges by 50 units at aprice of $1,250 each which is equal to the estimated stand-alone selling pricefor the cartridges

Accounting modification in a contract depends upon two factors Distinct Performance Obligation…

Required: For each of the following scenarios, determine if a separate contract is created by the modification and describe the accounting for revenue recognition. a. Entity Suppliers agrees to increase the number of cartridges by 50 units at a price of $1,250 each which is equal to the estimated stand-alone selling price for the cartridges. b. Entity Suppliers agrees to increase the number of cartridges by 50 units at the original contract price of $1,000 each which is significantly below the estimated stand-alone selling price for the cartridges. c. Same as (b) except Entity Suppliers determines the contract price of $1,000 is equal to the estimated stand-alone selling price for the cartridges after giving consideration to any adjustments that would be made based on the facts and circumstances.

Required: For each of the following scenarios, determine if a separate contract is created by the modification and describe the accounting for revenue recognition. a. Entity Suppliers agrees to increase the number of cartridges by 50 units at a price of $1,250 each which is equal to the estimated stand-alone selling price for the cartridges. b. Entity Suppliers agrees to increase the number of cartridges by 50 units at the original contract price of $1,000 each which is significantly below the estimated stand-alone selling price for the cartridges. c. Same as (b) except Entity Suppliers determines the contract price of $1,000 is equal to the estimated stand-alone selling price for the cartridges after giving consideration to any adjustments that would be made based on the facts and circumstances.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter5: Introduction To Business Expenses

Section: Chapter Questions

Problem 63P

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