Question: 1. Determine when the seller should recognize revenue. 2. Explain your answer using the GAAP revenue recognition guidelines. 3. Explain how each transaction would appear

1. Determine when the seller should recognize revenue.

2. Explain your answer using the GAAP revenue recognition guidelines.

3. Explain how each transaction would appear on the 2017 income statement and balance sheet.

Case 3: Your company sells a bundle of software products that includes a 3-year service contract for $100,000. Your company installed the software on July 1, 2018, and the customer paid $50,000 in cash. The balance is due on December 31, 2018. Identify the performance obligations and revenue in 2018, assuming:

(a) the performance obligations are interdependent

(b) the performance obligations are not interdependent (the service contract is sold for separately for $25,000 and the software for $100,000.)

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