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Coconut Tele

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Case 14-3 Coconut Telegraph 1) No it does not. According to ASC 985-605-15-4a, “Arrangements for products or services containing software that is incidental to the products or services as a whole.” The key word is incidental, which means it accompanies, but not a major part of something. In Buffet’s case, Coconut does not offer the system without the software because it is key to the functionality of the system. 2) Under ASC 985-605-25-3, revenue shall be recognized when all of the following criteria are met: Persuasive evidence of an arrangement exists, delivery has occurred, the vendor’s fee is fixed or determinable, collectability is probable. Coconut has contract signed, delivery has occurred, Coconut’s price for the Volcano system is fixed, and cash has already been collected. Coconut will recognize revenue of $12,000 as of February 1st, 2012. 3) Under ASC 985-605-25-47 “additional software products are included in a post contract customer support arrangement, the revenue allocable to the additional software products be accounted for separately from the post contract customer support arrangement as an element of a multiple-element arrangement. Since it is stated that Coconut and Buffet came to a “separate contract” on May 1st 2012, the separate contract will be treated as a multiple-element arrangement and accounted as such. 4) Under ASC 985-605-25-88 “If an arrangement to deliver software… requires significant production, modification… the service element does not meet the criteria for separate accounting set forth…the entire arrangement shall be accounted for in conformity... Product sales SHALL NOT BE accounted for as long-term contracts merely to avoid the delivery requirements normally associated with product sales for revenue recognition.” As per accountancy of the product, under ASC 985-605-25-89 “the vendor shall use either the

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