On December 31, 2017, InterTech Corporation, a network solutions company, signs a multi-year contract with Healy, Inc. Under the terms of the contract, InterTech will install hardware and software for Healy and provide software updates and tech support for two years. The total contract price for the solution is $6,750,000. In addition, InterTech will train Healy employees via on-site classes and provide one-on-one training for supervisors and higher level managers. Healy will pay $75 per hour per employee for classes and $375 per hour for one-on-one training. Healy must pay InterTech an upfront fee of $375,000 for the educational package, which will be used to offset educational hours in the future.
How should InterTech Corporation recognize revenue on the $6,750,000 contract? How should InterTech Corporation record the $375,000?

Question

On December 31, 2017, InterTech Corporation, a network solutions company, signs a multi-year contract with Healy, Inc. Under the terms of the contract, InterTech will install hardware and software for Healy and provide software updates and tech support for two years. The total contract price for the solution is $6,750,000. In addition, InterTech will train Healy employees via on-site classes and provide one-on-one training for supervisors and higher level managers. Healy will pay $75 per hour per employee for classes and $375 per hour for one-on-one training. Healy must pay InterTech an upfront fee of $375,000 for the educational package, which will be used to offset educational hours in the future. 
How should InterTech Corporation recognize revenue on the $6,750,000 contract? How should InterTech Corporation record the $375,000?

Quizplus · Accepted Answer

The Answer of On December 31, 2017, InterTech Corporation, a network solutions company, signs a multi-year contract with Healy, Inc. Under the terms of the contract, InterTech will install hardware and software for Healy and provide software updates and tech support for two years. The total contract price for the solution is $6,750,000. In addition, InterTech will train Healy employees via on-site classes and provide one-on-one training for supervisors and higher level managers. Healy will pay $75 per hour per employee for classes and $375 per hour for one-on-one training. Healy must pay InterTech an upfront fee of $375,000 for the educational package, which will be used to offset educational hours in the future. 
How should InterTech Corporation recognize revenue on the $6,750,000 contract? How should InterTech Corporation record the $375,000?

On December 31, 2017, InterTech Corporation, a Network Solutions Company