The Computer Market is an experienced computer dealer. Computer Market offers a number of services together with the electronics that it sells, or on a standalone basis. Services includes maintenance and installation on computers purchased from their store and not other vendors. Pricing for computers is as follows. Computer Pricing Component Price Computer only $700.00 Computer with installation $900.00 Computer with maintenance services $1,200.00 Computer with installation and maintenance services $1,400.00 In each instance where maintenance services are provided, the maintenance service is separately priced within the arrangement at $500. Additionally, the incremental amount charged by Computer Market for installation approximates the amount charged by independent third parties. Computers are sold subject to a general right of return. If a customer purchases a computer with installation and/or maintenance services, in the event Computer Market does not complete the service satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds $700. 

Step 1: Your client Jose purchases a computer with both installation and maintenance services for $1,400. Based on your experience, it is probable that the installation of the equipment will be performed satisfactory to the customer. Assume that the maintenance services are priced separately. Identify the separate performance obligations related to the revenue arrangement. 

Step 2: Indicate the amount of revenue that should be allocated to the computer, the installation, and the maintenance contract.

Step 3: Prepare the journal entry for Computer Market 

Step 4: Based on what you learned in the chapter, should there be any notes disclosed on the financial statements? If so, give an example of what should be listed in the notes.

Answer rating: 100% (QA)

Step 1 The revenue arrangement with Jose has two separate performance obligations the sale of a comp... View the full answer