Question: On January 1 2017 Mopps Corp agrees to provide Conklin

On January 1, 2017, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at $ 12,000 per year, which is the normal stand alone price that Mopps charges. On December 31, 2018, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to $ 10,000, and Conklin agrees to a 4 year extension that will extend services through December 31, 2023, at a price of $ 15,000 per year. At the time that the contract is modified, Mopps is charging other customers $ 13,500 for the cleaning and janitorial service.
Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2018? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.

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  • CreatedOctober 05, 2015
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