Worked-example setupScope and assumptions
- Cedar Trail Systems is fictional, and all amounts are whole US dollars.
- The equipment, installation, and training are supplied as three performance obligations; the example does not establish that conclusion.
- Transaction price is supplied as $144,000, and no discount or variable-consideration allocation exception applies.
- The evidence review supports SSPs of $90,000, $30,000, and $60,000; the calculation does not validate that evidence.
- Period
- Contract inception
- Units
- US dollars
- Rounding
- Whole dollars after carrying full precision
Problem
Cedar Trail sells standard equipment separately for $90,000 to similar customers in the same market. It does not sell installation separately. A controlled cost forecast is $24,000, and a 25 percent margin is appropriate. Together, those inputs support a $30,000 installation SSP. Comparable separate training packages support a $60,000 SSP after adjustments for class size and delivery format.
The three items are supplied as separate performance obligations. Transaction price is $144,000. The contract invoice assigns $130,000 to equipment, $4,000 to installation, and $10,000 to training. No evidence supports assigning the discount or a variable amount to selected obligations.
Prepare the SSP evidence record and the relative allocation. Reconcile the allocated amounts to transaction price and state what the schedule does not prove.
Establish the SSP inputs
Equipment has directly observable evidence because Cedar Trail sells the same item separately in comparable transactions. Installation uses expected cost plus an appropriate margin: $24,000 multiplied by 125 percent equals $30,000. Training uses adjusted comparable sales. The invoice amounts do not replace this evidence.
| Obligation | Evidence | SSP |
|---|---|---|
| Equipment | Comparable separate sales | $90,000 |
| Installation | Expected cost plus 25 percent margin | 30,000 |
| Training | Adjusted comparable separate sales | 60,000 |
| Total | $180,000 |
Allocate transaction price
Divide each SSP by total SSP, then multiply by the $144,000 transaction price.
| Obligation | SSP ratio | Allocation |
|---|---|---|
| Equipment | 50.0000% | $72,000 |
| Installation | 16.6667% | 24,000 |
| Training | 33.3333% | 48,000 |
| Total | 100.0000% | $144,000 |
Bundle discount is $36,000: total SSP of $180,000 less transaction price of $144,000. The ordinary method spreads that discount in the same proportions as the SSPs. The invoice layout does not control this result.
Verification boundary
The calculation checks the ratios, allocations, and contract-total reconciliation. It does not prove the number or identity of the performance obligations, the SSP evidence, transaction price, an allocation exception, or the timing of revenue. Those conclusions remain in their own workpapers.
Read ASC 606-10-32-31 through 32-36 for the SSP evidence and ordinary allocation rules. Then complete the independent Northstar practice.
Verified calculation · relative ssp allocation
The curriculum loader recomputed this example before it entered the site build. Expand any structured input to inspect the stated facts.
- reported allocations
- 3 fields
Inspect data
{
"equipment": 72000,
"installation": 24000,
"training": 48000
}- standalone selling prices
- 3 fields
Inspect data
{
"equipment": 90000,
"installation": 30000,
"training": 60000
}- transaction price
- 144,000
Recomputed result
| Measure | Value |
|---|---|
| equipment allocation ratio | 0.5 |
| equipment expected allocation | 72,000 |
| installation allocation ratio | 0.1667 |
| installation expected allocation | 24,000 |
| total reported allocation | 144,000 |
| total standalone selling price | 180,000 |
| training allocation ratio | 0.3333 |
| training expected allocation | 48,000 |
| transaction price | 144,000 |