Panarin Company entered into two contracts on the same date with Hjalmarsson Corporation. Panarin has provided the following analysis of price and cost for the contracts:

_____________________________Contract A _______Contract B

Contract price.........................$125,000..................$80,000

Cost of related goods................70,000....................55,000

Gross profit (loss) ...................$ 55,000..................$25,000

Hjalmarsson, the customer, may cancel both contracts if either of them is not fulfilled by Panarin in a timely manner. Stand-alone prices are typically $120,000 for the goods in Contract A and $80,000 for the goods in Contract B.

Required:

1. Should the two contracts be combined for purposes of applying the 5-step revenue recognition model?

2. What amount of revenue should Panarin associate with each of the contracts?

3. When should revenue be recognized on each of the contracts?