Prepare the journal entry gold examiner would record

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3. Prepare the journal entry Gold Examiner would record on March 30.4. Prepare the journal entry Gold Examiner would record on April 1.TVRemoteInstallation
Requirement 1Number of performance obligations in the contract: 2Delivery of gold is one performance obligation. The additional insurance is a second performanceobligation. The insurance service iscapable of being distinctbecause the bank could choose to receivesimilar services from another insurance provider, and it is separately identifiable, as it is not highlyinterrelated with the other performance obligation of delivering gold, and the seller’s role is not tointegrate and customize them to create one service or product. So, the insurance qualifies as aperformance obligation. The receipt of cash prior to delivery is not a performance obligation, but rathergives rise to deferred revenue associated with performance obligations to be satisfied in the future.Requirement 2Value of the gold bars$1,440/unit 100 units = $ 144,000Stand-alone selling price of the insurance$60 100 units =6,000Total of stand-alone prices$150,000Gold Examiner first identifies each performance obligation’s share of the sum of the stand-aloneselling prices of all deliverables: Gold bars: $144,000= 96%$144,000 + 6,000Insurance: $6,000=4% $144,000 + 6,000100%
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Exercise 5-5 (concluded)Gold Examiner then allocates the total selling price based on stand-alone selling prices, as follows: Entry on March 1, 2018:Cash147,000Deferred revenue–gold bars141,120Deferred revenue–insurance 5,880Requirement 3Entry on March 30, 2018:Deferred revenue–gold bars 141,120Sales revenue141,120Gold Examiner recognizes only the portion of revenue associated with passing of the legal title. Therevenue associated with insurance coverage will be earned only when that performance obligation issatisfied.Requirement 4Entry on April 1, 2018:Deferred revenue–insurance 5,880Service revenue5,880Thomas Consultants provided Bran Construction with assistance in implementing various cost-savings initiatives. Thomas’ contract specifies that it will receive a flat fee of $50,000 and an additional $20,000 ifBran reaches a prespecified target amount of cost savings. Thomas estimates that there is a 20% chance that Bran will achieve the cost-savings target.Required:1. Assuming Thomas uses the expected value as its estimate of variable consideration, calculate the transaction price.2. Assuming Thomas uses the most likely value as its estimate of variable consideration, calculate the transaction price.3. Assume Thomas uses the expected value as its estimate of variable consideration, but is very uncertain of that estimate due to a lack of experience with similar consulting arrangements. Calculate the transaction price.$147,000Transaction Price$141,120Gold$5,880Insurance96%4%
Requirement 1The expected value would be calculated as follows:Possible Amounts ProbabilitiesExpected Amounts$70,000 ($50,000 fixed fee + 20,000 bonus)× 20% = $14,000$50,000 ($50,000 fixed fee + 0 bonus)× 80% =40,000Expected contract price at inception $54,000Or, alternatively: $50,000 + ($20,000 × 20%) = $54,000Requirement 2The most likely amount is the flat fee of $50,000, because there is a greater chance of not qualifyingfor the bonus than of qualifying for the bonus, so that is the transaction price.

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