Problem $3-5$ Combining multiple contracts $($LO$3-2,$ LO$3-3,$ LO$3-4)$

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:

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$$Contract AContract BContract price$$125,000$$$80,000$Cost of related goods$70,00055,000$Gross profit $($loss$)$$$55,000$$$25,000$

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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$.$

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Required:

Should the two contracts be combined for purposes of applying the five$-$step revenue recognition model?

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

When should revenue be recognized on each of the contracts?