Gundy Communications Systems signed a contract to develop and install an integrated network for Dwight Auto Dealerships, Inc. in five phases. Each phase is considered a performance obligation. The transaction price, including installation, is $ 2,600,000. Each phase is fully functional at the point of delivery. The five phases of the total network products each have standalone values as follows:
Network Phase Standalone Sales Value
Phase 1 ………………………$ 300,000
Phase 2 ……………………… 760,000
Phase 3 ……………………… 560,000
Phase 4 ……………………… 440,000
Phase 5 ……………………… 940,000
Total $ 3,000,000
The contract price is collected in advance and Phases 1 and 2 are completed during the current year. Gundy expects Phase 3 and 4 to be completed in the next 12 months and Phase 5 in the following year. Ignore implications of any financing component.
Required
a. Prepare the journal entry to record any revenue to be recognized during the current period. Show all supporting computations.
b. Prepare disclosures related to any remaining performance obligations at the end of the current year.