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

____________________________Contract A _______Contract B

Contract price......................$100,000.................$ 50,000

Cost of related goods.............62,000....................54,000

Gross profit (loss) ...............$ 38,000....................($4,000)

You inquired about why Teuvo would have agreed to make a sale at a loss. The company's controller indicated that the company felt the profit on Contract A was sufficient to justify selling at a loss on Contract B, and it viewed the two contracts, together, as sufficiently profitable. "We normally get $85,000 for the goods in Contract A and $60,000 for the goods in Contract B, so we were happy with the transactions, but this is how the customer wanted to structure them."

Required:

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

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

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