On June 4, Seller Company signed a sales agreement with Buyer Company to deliver and install a piece of factory equipment. The total contract price is $300,000. Customers usually buy an equipment/installation package, but Seller Company does sell equipment without installation and also installs equipment sold by other companies. The selling price of the equipment without installation is $290,000. The separate price for installation of this piece of equipment is $20,000.
(1) How much revenue should be recognized by Seller Company when the equipment is delivered but before it is installed?
(2) Now repeat (1) assuming that there is no market for separate installation. In other words, assume that no fair value of the separate installation service can be reliably determined. Note: This Practice Exercise is based on Example 3 in EITF 00-21.