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Boston Automation

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BOSTON AUTOMATION SYSTEMS INC.
Boston Automations Systems is a capital equipment and testing instrument manufacturer and supplier to electronics based and semiconductor industries.
During 1999, Boston Automation had three divisions-
Glendale division, Advanced Technology Division and Technical Devices division.
Problem Statement:
The CFO of the company, Daniel Fischer undertakes a revenue recognition review for each of the 3 divisions as SEC has issued SAB 101 guidelines. The effects of applying this guideline would be reported as a cumulative effect adjustment resulting from a change in accounting principle.
As a test, Fisher has selected from each of the three divisions a limited number of representative sales transactions to review and the main question is- if all revenue recognition criteria is met other than the issues raised by the customer acceptance provisions, when should revenue be recognized.
SAB 101
The guidelines are as follows: 1. Persuasive evidence exists 2. Delivery of ordered goods has occurred or services have been rendered. 3. The sellers price to the buyer is fixed or determinable 4. Collectability of the sales proceeds is reasonable assured
ANS1.
The revenue recognition methods adopted by Boston Automation Systems are as follows: 1. Product revenue is recognized upon shipment i.e Sales Method.
The products of the company come with a warranty, and the company recognizes the estimated cost of this warranty when the revenue has been recognized. 2. The service revenues are recognized as the services are provided or over the period of the contract as applicable i.e Delivery method. The service revenue is separated from product, installation and maintenance revenue based on the amounts charged when they are separately sold. 3. For certain contracts revenue is recognized using percentage-of-completion

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