Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 18: Q20Q. (page 1031)

When does a company satisfy a performance obligation? Identify the indicators of satisfaction of a performance obligation.

Short Answer

Expert verified

Performance obligations get satisfied when the company physically transfers assets to the customers.

Step by step solution

01

Definition of Performance Obligation

The term performance obligation refers to the seller's obligation to fulfill the terms of the contract and to sell or supply services to consumers as promised. It may be stated explicitly, indirectly, or based onstandard business practice.

02

Indicators of satisfaction of a performance obligation

When the customer receives the right to the goods or services, the firm has fulfilled its performance obligation. The following are signs that the customer has regained control:

1. The corporation has a claim to theasset's payment.

2. The firm transferred the asset's legal title.

3. The corporation physically transferred the asset.

4. The client bears all of the risks and benefits of ownership.

5. The customer has accepted the asset.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

How should a franchisor account for continuing franchise fees and routine sales of equipment and supplies to franchisees?

How do companies recognize revenue from a performance obligation over time?

Fuhremann Co. is a full-service manufacturer of surveillance equipment. Customers can purchase any combination of equipment, installation services, and training as part of Fuhremann’s security services. Thus, each of these performance obligations is separate from individual standalone selling prices. Laplante Inc. purchased cameras, installation, and training at a total price of \(80,000. Estimated standalone selling prices of the equipment, installation, and training are \)90,000, \(7,000, and \)3,000, respectively. How should the transaction price be allocated to the equipment, installation, and training?

Explain a bill-and-hold sale. When is revenue recognized in these situations?

Identify the five steps in the revenue recognition process.
See all solutions

Recommended explanations on Business Studies Textbooks

Business Case Studies

Read Explanation

Corporate Finance

Read Explanation

Intermediate Accounting

Read Explanation

Change Management

Read Explanation

Business Operations

Read Explanation

Business Development

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free