Question

On March 1, 2021, Gold Examiner receives $147,000 from a local bank and promises to deliver 100 units of certified 1-oz. gold bars on a future date. The contract states that ownership passes to the bank when Gold Examiner delivers the products to Brink’s, a third-party carrier. In addition, Gold Examiner has agreed to provide a replacement shipment at no additional cost if the product is lost in transit. The stand-alone price of a gold bar is $1,440 per unit, and Gold Examiner estimates the stand-alone price of the replacement insurance service to be $60 per unit. Brink’s picked up the gold bars from Gold Examiner on March 30, and delivery to the bank occurred on April 1. Required:1. How many performance obligations are in this contract?

Answer 1

Answer:

Two

Explanation:

There are two performance obligations in this contract which are as follows:

(1) First performance obligation is delivery of the 100 units of gold bars on a future date.  Because Gold examiner promises to the bank.

(2) The Second performance obligation is replacement insurance service as there are many insurance service providers, so insurance service can be availed from any of the other insurance service providers.