60.1K

Verified Solution

Link Copied!

Cullumber Company manufactures equipment. Cullumber's products range from simple automated machinery to complex systems

containing numerous components. Unit selling prices range from $$400,000$ to $$1,500,000$ and are quoted inclusive of installation. The

installation process does not involve changes to the features of the equipment and does not require proprietary information about the

equipment in order for the installed equipment to perform to specifications. Cullumber has the following arrangement with Uli Inc.

$,$ Uli purchases equipment from Cullumber for a price of $$1,040,000$ and contracts with Cullumber to install the equipment.

Cullumber charges the same price for the equipment irrespective of whether it does the installation or not. The cost of the

equipment is $$652,000.$

$,$ Uli is obligated to pay Cullumber the $$1,040,000$ upon the delivery and installation of the equipment.

Cullumber delivers the equipment on June $1,2025,$ and completes the installation of the equipment on September $30,2025.$ The

equipment has a useful life of $10$ years. Assume that the equipment and the installation are two distinct performance obligations

which should be accounted for separately.

Assume Cullumber does not have market data with which to determine the standalone selling price of the installation services. As a

result, an expected cost plus margin approach is used. The cost of installation is $$38,700$; Cullumber prices these services with a $25\%$

margin relative to cost$.$

$($a$)$

X Your answer is incorrect.

How should the transaction price of $$1,040,000$ be allocated among the service obligations? $($Do not round intermediate

calculations. Round final answers to $0$ decimal places, e$.$g$.5,275.)$

Equipment $Cullumber Company manufactures equipment. Cullumber's products range from simple automated machinery to complex systems containing numerous components. Unit selling prices range from $$400,000$ to $$1,500,000$ and are quoted inclusive of installation. The installation process does not involve changes to the features of the equipment and does not require proprietary information about the equipment in order for the installed equipment to perform to specifications. Cullumber has the following arrangement with Uli Inc.

Uli purchases equipment from Cullumber for a price of $$1,040,000$ and contracts with Cullumber to install the equipment. Cullumber charges the same price for the equipment irrespective of whether it does the installation or not. The cost of the equipment is $$652,000.$

Uli is obligated to pay Cullumber the $$1,040,000$ upon the delivery and installation of the equipment.

Cullumber delivers the equipment on June $1,2025,$ and completes the installation of the equipment on September $30,2025.$ The equipment has a useful life of $10$ years. Assume that the equipment and the installation are two distinct performance obligations which should be accounted for separately.

Assume Cullumber does not have market data with which to determine the standalone selling price of the installation services. As a result, an expected cost plus margin approach is used. The cost of installation is $$38,700$; Cullumber prices these services with a $25\%$ margin relative to cost$.$

Answer & Explanation Solved by verified expert

See Answer