What are the accounting issue(s) and the relevant components of the authoritative literature?
2. How does the fact that ChemInc has not shipped the MCA to Bond by the end of the year affect the recognition of revenue by ChemInc in 20X9? What other issues must be considered before deciding when ChemInc can recognize revenue? Explain your answer.
3. What are the necessary journal entries for the quarters ending December 31, 20X9, and March 31, 20Y0?
Case 2:
Assembly Lines Incorporated (ALI) is a public company with a calendar year-end. In its current fiscal quarter, ending September 30, 20X9, it entered into a sales agreement with Candy Maker International (CMI). Under the sales agreement, ALI is selling an assembly line system to CMI that consists of the following three components:
• Mixer Segment • Molding Segment • Packaging Segment
ALI will install the assembly line system at CMI’s Chicago manufacturing facility, where it will be used by CMI to manufacture candy bars. The sales agreement between ALI and CMI provides for the following …show more content…
What are the accounting issue(s) and the relevant components of the authoritative literature?
2. How much of the arrangement consideration should be allocated to each unit of accounting? Be sure to identify any other issues that must be resolved to determine how revenue should be allocated.
3. Now, assume that sufficient evidence exists to support the selling price of $95,000 for the assembly line system. However, there is some concern regarding the $12,000 charged for the installation services that ALI heard about from a prior customer. What type of analysis must be done related to the $12,000 price for installation services to decide whether it should be used to allocate revenue to the components in the sales agreement? Explain your answer.
4. If there are no other issues that would affect the timing of revenue recognition, how much revenue should be recognized in the following periods? Include journal entries in your answer. (Assume that ALI has early adopted any pending guidance included in the relevant sections of the Codification.)
a. The quarter ending September 30,