Your assignment
Role: Granite Harbor accountant analyzing a customer contract for the controller
Deliverable: Five-step conclusion identifying the controlling contract facts, calculations, recognition timing, and customer-contract balances.
Evidence basis: fictional
Evaluation criteria
- fact to conclusion (50%): Connects each conclusion to the fact that controls it and explains what changed fact would alter the result.
- calculation and reconciliation (30%): Allocates the transaction price and reconciles performance, billing, and collection without netting the receivable.
- communication (20%): Separates supported conclusions from assumptions and explains the result in usable language.
Established company context
Granite Harbor Manufacturing is the Unit 2 classroom company. It continues to manufacture cabinets after selling its separate cabinet-hardware line. This contract belongs to that continuing operation and does not revise the annual statement amounts used in Sessions 6 and 7.
Contract facts
On December 2, 2024, Granite Harbor signs an enforceable contract with a commercial customer for a standard cabinet system, routine installation, and 36 months of maintenance. Account setup enables Granite Harbor to perform but does not transfer a service to the customer. The customer can benefit from the standard cabinets and installation separately; another vendor could perform the routine installation without significantly modifying the cabinets.
The contract includes $120,000 fixed consideration and a $12,000 bonus if installation is complete by January 1, 2025. Granite Harbor met 39 of 40 comparable deadlines. No unusual site condition exists, and Granite Harbor controls manufacturing, delivery, and installation scheduling.
The invoice labels the fixed consideration as $110,000 of cabinetry and $10,000 of service to match the customer's purchasing budget. If Granite Harbor earns the bonus, the invoice also labels that amount as cabinetry.
Standalone selling prices are $100,000 for the cabinet system, $20,000 for installation, and $30,000 for maintenance. Granite Harbor also sells comparable expedited installation for $20,000. Assigning the bonus entirely to installation would allocate $28,000 to that obligation, which would not be consistent with the allocation objective. The customer obtains control of the cabinet system on January 1 through possession, legal title, risk of loss, and the ability to direct use. Installation is complete that day. Maintenance is a stand-ready service provided evenly over three years.
By December 31, Granite Harbor has recognized $114,400, billed $100,000 unconditionally, and collected $90,000. The next invoice depends on Granite Harbor providing another month of maintenance. Analyze each step and explain why the year-end receivable and contract asset remain separate.