Comfort King Ltd. sells central air units to local residents as well as ongoing maintenance plans. Jack Frost agreed to an arrangement with Comfort King to purchase a central air package for $ 4,000 on May 1, 2021. In addition to the sale, the arrangement includes unit installation and maintenance on the central air unit for two years. Jack Frost is receiving a great deal as the full contract price represents the stand-alone value of the central air unit. Comfort King also provides installation and central air maintenance separately to its customers as follows: installation fee $ 400 and annual central air maintenance fee $ 250. Comfort King installed the unit on May 20, 2021, and was immediately paid the agreed-upon price by Jack Frost.
Instructions
Complete the following steps to determine if the appropriate criteria have been met for Comfort King to recognize revenue under the contract-based approach to revenue recognition. Be sure to conclude whether Comfort King can recognize the revenue and when it would be appropriate to do so.1. Is there a contract?
6. 2. What is the performance obligation?
7. 3. What is the transaction price?
8. 4. Is there a need to allocate the selling price?
9. 5. Has the performance obligation been satisfied?

Question

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The Answer of Comfort King Ltd. sells central air units to local residents as well as ongoing maintenance plans. Jack Frost agreed to an arrangement with Comfort King to purchase a central air package for $ 4,000 on May 1, 2021. In addition to the sale, the arrangement includes unit installation and maintenance on the central air unit for two years. Jack Frost is receiving a great deal as the full contract price represents the stand-alone value of the central air unit. Comfort King also provides installation and central air maintenance separately to its customers as follows: installation fee $ 400 and annual central air maintenance fee $ 250. Comfort King installed the unit on May 20, 2021, and was immediately paid the agreed-upon price by Jack Frost.
Instructions
Complete the following steps to determine if the appropriate criteria have been met for Comfort King to recognize revenue under the contract-based approach to revenue recognition. Be sure to conclude whether Comfort King can recognize the revenue and when it would be appropriate to do so.1. Is there a contract?
6. 2. What is the performance obligation?
7. 3. What is the transaction price?
8. 4. Is there a need to allocate the selling price?
9. 5. Has the performance obligation been satisfied?