ABC Company sells office furnitures. The company quote customers for the price of the furnitures including installation and assembly. XYZ Company signed a contract with ABC company to purchase, install and assemble furnitures for one of its branches. The total contract consideration was $37,500. The furnitures will be delivered and installed on September 14.
XYZ is a loyal customer and therefore ABC offered a free 2 years warranty for the furniture. The stand alone selling price of the warranty is $1,000. ABC company offers furnitures installation and assembly as a separate service and charge $1,500 for installation and assembly for a similar project size.
Please answer one of the questions below:
1- Explain in detail how to apply two of the steps of revenue recognition to help ABC management properly recognize the revenue from this transaction according to ASC 606. (excluding step 1)
2- Book the journal entries required to be recorded as of September 14 and December 31. (show amounts and calculations)
Sample Solution
