a. Rory Inc. is a manufacturer of windows. Rory primarily sellsto residential builders who take delivery of windows only when thehouse is at the stage at which the windows can be immediatelyinstalled. Consequently, builders will order the total number ofwindows in the various shape and size needed for an entire season.The builder will be invoiced as the order is completed and thewindows put into a separate section of the warehouse and taggedwith the customer name. But the windows will not be delivered untilrequested by the customer. The completed order is held in Rory'swarehouse and shipped as the requests are received. Payment is made60 days after the invoice date.
b.Heckiner Inc, manufacture customized equipment used in thepaper packing industry, Customers can pick from a variety of"sections" to build a customized piece of machinery.It takes ninemonths to build these machines. However, even though the machinesare"customized" they can be easily modified at any time during theproduction phase for another customer.since the section arestandard and easily disassembled if required. The contract outlineswhich standard sections will be required and how they will beassembled for the final machine. the amount of consideration to bepaid. and that the customer will take the title on delivering andinspection of the machinery. Payment is due after delivery andinspection.
c. Nevo Corp, develops customized software for clients relatedto inventory, management. Noro started with the customerspecifications and then writes the software based on theserequirements. it takes about 18 months to complete the project fromconcept and specifications through programming, debugging, andtesting. Included in the contract are installation, on-sitetesting, training, and two year's upgrade and service9which certainmilestone are achieved. A contract outlines the specification forthe software, a project plan for installation, testing, training,upgrade and service agreements separately to the customer, butinstallation, testing, and training are not offered separatelysince these are customized to the specific customer's software.
For each situation, asset the five steps and determine whenrevenue is recognized and how costs and payment.
