Question

3. Perfect Party Company contracts with a customer to provide its birthday party package, including a cake, balloons, and musical entertainment. In addition, Perfect Party will host the event. Perfect Party commonly offers the musical entertainment when it hosts the party. However, it will provide the musical entertainment without hosting the party. Perfect Party often sells cakes and balloons separately that it delivers before a party. Identify the separate performance obligations in this contract.

Answer 1

Answer:

Perfect Party Company

The separate performance obligations in this contract are:

Provision of cake

Provision of balloons

Provision of Musical Entertainment

Explanation:

a) Data and Analysis:

Contract to provide birthday party package

The party package or separate performance obligations are:

Provision of cake

Provision of balloons

Provision of Musical Entertainment

b) A separate performance obligation exists in accordance with ASC 606 when the service being provided by the Perfect Party Company are distinct from one another.  This implies that these obligations can be accounted for and delivered separately.  Thus, the customers can benefit from the separate obligations distinctly.