Metal Inc. manufactures equipment that is used to make widgets. The widget-making process involves two pieces...

 

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Metal Inc. manufactures equipment that is used to make widgets. The widget-making process involves two pieces of equipment, both of which Metal Inc. manufactures. In an arrangement with a new customer, Metal Inc. sells both pieces of equipment, along with 10 days of training for the customer's employees, for a total fee of $400,000. Title to each machine transfers upon shipment. Metal Inc. does not grant general or specific refund rights to its customers. Metal Inc. also sells each piece of equipment separately. In addition, competitors manufacture machines that perform the same functions as Product A and B, and machines from different manufacturers are interchangeable. Metal Inc. sells Product A separately for S200,000, and Product B separately for $250,000. No amount of the arrangement consideration is contingent upon performance of undelivered components. Metal Inc. sells training services separately to customers who already have equipment installed and want additional training for new employees. Metal Inc. charges $5,000 per day for training. However, not all customers purchase training, as Metal Inc. includes operating manuals with its equipment. Metal Inc. delivers Product A first, then Product B, then the training, using the installed machines to demonstrate the machines' functionality. Payment terms are $100,000 upon delivery of Product A, $200,000 upon delivery of Product B, and $100,000 upon providing the training. 1. Determine whether Product A, Product B, and training should be accounted for as separate units or a single unit of accounting and explain why. 2. Allocate the total fee of S400,000 among the three deliverables. Metal Inc. manufactures equipment that is used to make widgets. The widget-making process involves two pieces of equipment, both of which Metal Inc. manufactures. In an arrangement with a new customer, Metal Inc. sells both pieces of equipment, along with 10 days of training for the customer's employees, for a total fee of $400,000. Title to each machine transfers upon shipment. Metal Inc. does not grant general or specific refund rights to its customers. Metal Inc. also sells each piece of equipment separately. In addition, competitors manufacture machines that perform the same functions as Product A and B, and machines from different manufacturers are interchangeable. Metal Inc. sells Product A separately for S200,000, and Product B separately for $250,000. No amount of the arrangement consideration is contingent upon performance of undelivered components. Metal Inc. sells training services separately to customers who already have equipment installed and want additional training for new employees. Metal Inc. charges $5,000 per day for training. However, not all customers purchase training, as Metal Inc. includes operating manuals with its equipment. Metal Inc. delivers Product A first, then Product B, then the training, using the installed machines to demonstrate the machines' functionality. Payment terms are $100,000 upon delivery of Product A, $200,000 upon delivery of Product B, and $100,000 upon providing the training. 1. Determine whether Product A, Product B, and training should be accounted for as separate units or a single unit of accounting and explain why. 2. Allocate the total fee of S400,000 among the three deliverables.

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Answes 1 Stept At the inception shall identity the arrangemint Identifying the units in the arrangem... View the full answer