Sam Baker Enters into a Contract with Pit Company to Purchase

question 67

Multiple Choice

Sam Baker enters into a contract with Pit Company to purchase a gas fireplace unit. The sale agreement is for a total price of $ 3,000 and includes delivery of the unit, installation, and a two-year warranty. Installation successfully occurred on November 1, 2021. Pit Company often sells this gas fireplace for $ 2,500 and offers installation and warranty services at $ 500 and $ 300, respectively. Using the stand-alone fair values, what amount would be recorded as revenue on November 1, 2021 under the contract-based approach to revenue recognition? Round to the nearest whole dollar.

• A) $ 2,727
• B) $ 2,500
• C) $ 2,273
• D) $ 3,000

---

Definitions:

Claim or Adjustment

A request made by a customer to a company regarding a problem with a product or service, seeking a resolution or compensation.

Organization at Fault

A situation where a company or group is responsible for a problem or error, often leading to a need for accountability and rectification.

Goodwill Messages

Communications intended to foster positive relationships and express kindness or goodwill.

Important

Having significant value, meaning, or influence on an outcome or in a particular context.