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Financial Software Inc. (FSI) provides ERP software to large corporations. Big Corporation signs a contract with...

Financial Software Inc. (FSI) provides ERP software to large corporations. Big Corporation signs a contract with FSI on January 1, 2018. FSI will provide the ERP, including installation and testing, consulting services to integrate the software with all of Big Corp’s other systems, and training services. Another firm could provide the consulting services and/or training services, but FSI requires that they perform the installation and testing. The training will be provided for 3 years. The total price of the contract is $2,300,000. FSI would charge $1,750,000 for the software (including installation and testing) and the estimated Fair value of the consulting services is $500,000. The total fair value of the training is $150,000 over three years. FSI completes the installation and testing during 2018. The consulting services are 50% complete in 2018 and fully completed in 2019. Approximately 50% of the training services are provided in 2018 and then 25% and 25% in 2019 and 2020, respectively.

Determine how to recognize revenue in 2018, 2019 and 2020. Please explain your recommendation.

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ekkarill92 answered 1 year ago
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