Question

On February 1, 2018, company A sold a package of goods to a customer that included Products A, B, and C. The total sales price was $100,000 which was paid by the customer and product A was delievered to the customer on that date. Product B was delievered to the cistomer on March 1, 2018 and product C was delivered on August 1, 2018. Company A regularly sells Product A and b on a stand-alone basis for $60,000 and $40,000, respectively. However, Company A only sells Product C when packaged with other items. Company A considers each product a performance obligation and considers the performance obligation satisfied upon delivery of the product to the customer.   

Required: How much revenue could Company A recognize on:

Feburary 1, 2018,

March 1, 2018

August 1, 2018?

Answer 1

A product transferred to customers is a separate performance obligation if the company separately sells a product or the customer can benefit from that product together with other resources. Since the Company Sells Product A & B on a stand-alone basis, there are only two performance obligations in the contract. Product C is not a seperate performance obligation. The bundles price is allocated between the performance obligations in the ratio of their relative stand-alone price.

Product A: $60,000 - recognised upon delivery i.e February 1, 2018,

Product B: $40,000 -  recognised upon delivery i.e March 1, 2018

August 1, 2018 - No revenue is recognised