Steps of Revenue Recognition: Example 1, 101

For Revenue from Contracts with Customers:
[An Example]
(1) Contract
To deliver Equipment and Service.
(2) Two Performance Obligations (POB):
(2a) Deliver Equipment on Dec. 31, 2022
(2b) Maintenance Service for 2023
(3) Total Transaction Price (TTP) $48,000
(4) Standalone Selling Price (SSP)
(4a) Equipment $34,000
(4b) Maintenance Service $16,000
Total SSP = $50,000
(5) Amount of Revenue Recognized (ARR)
(5a) Dec. 31, 2022, Equipment portion
$48,000 x (34,000 / 50,000) = $32,640
(5b) Dec. 31, 2023, Service portion
$48,000 x (16,000 / 50,000) = $15,360
Total Revenue from the Contract = $48,000

#Financial Accounting #Finance #Financial Statement Analysis #Earnings #Profit #GAAP #Generally Accepted Accounting Principles
#Revenue Recognition #Revenue from Contracts with Customers
#Standalone Selling Price