On January 2, 2019, Royal Class Air Conditioning and Heating sold and installed an HVAC...
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Accounting
On January 2, 2019, Royal Class Air Conditioning and Heating sold and installed an HVAC system to Peak Co. for $2,750. The selling price is allocated as follows: (1) 90% for the HVAC unit and (2) 10% for an ongoing 4-year service contract for the HVAC unit.
a. Determine each of the following related to this sale:
1. Identify the contract between the company and the customer.
2. Identify the performance obligations of Royal Class.
3. Determine the transaction price.
4. Allocate the transaction price to the performance obligations.
b. What amount of revenue should Royal Class recognize for the year ended December 31, 2019?
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