Business Analysis and Reporting (BAR) — Core Concepts Practice Questions

On January 1, Year 1, Apex Corp. entered into a contract with a customer to transfer a specialized machine for $500,000. The contract specifies that Apex will install the machine, which is a significant and complex process. The installation service is required for the machine to function as intended by the customer, and there is no standalone selling price for the machine without installation. Apex estimates that the installation will take approximately six months. How should Apex recognize revenue for this contract?

On January 1, Year 1, TechSolutions Co. leased a specialized manufacturing robot from RoboLease Inc. The lease term is 5 years, and the robot has an economic life of 7 years. The present value of the lease payments is $450,000, which is 92% of the robot's fair value. The lease does not transfer ownership, nor does it contain a purchase option. The robot is not of a specialized nature that it would have no alternative use to RoboLease Inc. at the end of the lease term. What type of lease should TechSolutions Co. classify this as under ASC 842?

Global Distributors Inc. acquired 100% of the voting stock of Local Logistics Co. for $15,000,000 in cash. At the acquisition date, Local Logistics had identifiable assets with a fair value of $18,000,000 and liabilities with a fair value of $4,000,000. How much goodwill should Global Distributors recognize from this business combination?