| Course | ACC 317 Intermediate Accounting I |
|---|---|
| Module | Module 4 |
| Paper type | undergraduate revenue recognition analysis under ASC 606 |
| Length | About 1,050 words, 6 pages |
| Format | APA 7 student paper |
| School | Southern New Hampshire University |
| Program | BS Accounting |
| Updated | October 2026 |
Free sample paper for ACC 317 Module 4
One Contract, Four Promises: Applying ASC 606 to a Composite Hot Tub Manufacturer's Resort Agreement
[Student Name]
Southern New Hampshire University
ACC 317: Intermediate Accounting I
Project One
[Instructor Name]
[Date]
The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.
One Contract, Four Promises: Applying ASC 606 to a Composite Hot Tub Manufacturer's Resort Agreement
Introduction
In January, the Tennessee tub maker from earlier modules signed a contract with a mountain resort that was adding private hot tubs to 24 cabins. The contract covers the tubs, installation on prepared decks, three years of quarterly maintenance visits, a three-year subscription to the company's water-care app and a $12,000 bonus if all 24 tubs are installed before the resort's May 1 opening. The resort pays half of the fixed price at signing and the rest on completion. This project applies ASC 606 to determine how much revenue the manufacturer should recognize in the first year and what it should report on its balance sheet at December 31.
Step 1: Identify the Contract
ASC 606 treats an arrangement as a contract only if both sides have approved it, the rights and payment terms of each can be pinned down, the deal would change the seller's future cash flows, and the seller expects to collect what it is owed (Financial Accounting Standards Board, 2014). The signed agreement meets each criterion: it names the goods and services, sets a price and payment schedule and was signed by both parties, and the resort has paid on time under two earlier contracts. The contract also includes a cancellation clause with a penalty, which supports the conclusion that enforceable rights exist.
Step 2: Identify the Performance Obligations
The contract contains five promises, and each must be tested for whether it is distinct. Kieso et al. (2019) frame distinctness as two questions: could the resort get value from the item by itself or with things it can easily obtain, and is the promise separable from the other promises rather than an input to a combined output?
The tubs are distinct: the resort could buy and use them without the other services. Installation is distinct as well, because local contractors install hot tubs routinely, and installation does not significantly modify the tubs. The three-year maintenance plan is distinct, since the manufacturer sells it separately to hotel customers. The app subscription is distinct for the same reason. The fifth promise is the standard one-year warranty that the tubs will be free from defects. That is an assurance-type warranty: it promises only that the product works as specified. It is not a performance obligation, and its expected cost is accrued as warranty expense when the tubs are delivered. The contract therefore has four performance obligations.
Step 3: Determine the Transaction Price
The fixed price is $304,920. The $12,000 bonus is variable consideration. Because the outcome is binary, either the tubs are installed by May 1 or they are not, the most likely amount method predicts it better than an expected value. The company's production schedule shows the tubs completed in March, installation crews are booked and the risk of missing the date is low, so it is probable that including the bonus will not lead to a significant reversal of revenue. The transaction price is therefore $316,920.
Step 4: Allocate the Transaction Price
The price is allocated on the basis of standalone selling prices, the prices at which the company sells each item separately.
Table 1. Allocation of the Transaction Price
| Promise to the resort | Price if sold alone | Percent of total | Price allocated |
|---|---|---|---|
| 24 tubs at $11,500 | $276,000 | 82.7% | $262,200 |
| Installation, 24 at $900 | 21,600 | 6.5% | 20,520 |
| Maintenance, 3 years, 24 at $1,200 | 28,800 | 8.6% | 27,360 |
| App subscription, 3 years, 24 at $300 | 7,200 | 2.2% | 6,840 |
| Total | $333,600 | 100.0% | $316,920 |
The transaction price is 95 percent of the total standalone prices, so the resort received a 5 percent bundle discount. With no evidence that the discount relates to any one item, ASC 606 requires it to be spread across all four obligations in proportion to their standalone prices, which is what multiplying each price by 95 percent achieves.
Step 5: Recognize Revenue
The tubs and installation transfer to the resort on one identifiable day, so they are recognized at that moment. Installation was completed and accepted on April 22, so $262,200 of tub revenue and $20,520 of installation revenue are recognized in April. Maintenance and the app subscription are satisfied over time, because the resort receives and uses the benefit as the services are provided. Each is recognized evenly over 36 months beginning in May: $760 a month for maintenance and $190 a month for the app.
Table 2. Revenue in Year One and Contract Liability at December 31
| Obligation | Year-one revenue | Deferred at December 31 |
|---|---|---|
| Tubs | $262,200 | $0 |
| Installation | 20,520 | 0 |
| Maintenance, 8 months at $760 | 6,080 | 21,280 |
| App, 8 months at $190 | 1,520 | 5,320 |
| Total | $290,320 | $26,600 |
Journal Entries and Balance Sheet Effect
At signing, the company records the $152,460 deposit as a debit to Cash and a credit to Contract Liability. In April, on completion, it records the second $152,460 payment and the $12,000 bonus received in May as cash, and recognizes revenue as obligations are satisfied by debiting Contract Liability and crediting Revenue for the tubs and installation. From May through December, it moves $950 a month from Contract Liability to Revenue. By December 31 all $316,920 has been collected, $290,320 has been recognized and $26,600 remains as a contract liability, of which $11,400 will be recognized in the next twelve months and is classified as current.
Why the Judgments Matter
The analysis changes the timing of about $26,600 of revenue, small for a $64 million company but representative of the many service bundles the company now sells to hotels. Napier and Stadler (2020) found that the adoption of IFRS 15, the international counterpart of ASC 606, had limited effects on reported revenue for most firms but meaningful effects for companies with bundled long-term contracts, and that some firms changed contract terms in response. For this company, the finding suggests that as maintenance plans grow, the contract liability will become a more visible part of the balance sheet and a useful signal of future revenue.
Conclusion
The resort contract has four performance obligations and a transaction price of $316,920, including the probable early-delivery bonus. Allocating the price by standalone selling prices spreads the 5 percent discount across all four. The company recognizes $290,320 of revenue in the first year, at installation for the tubs and installation service and over 36 months for maintenance and the app, and reports a $26,600 contract liability at year end.
References
Financial Accounting Standards Board. (2014). Revenue from contracts with customers (Topic 606) (Accounting Standards Update No. 2014-09). Author.
Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate accounting (17th ed.). Wiley.
Napier, C. J., & Stadler, C. (2020). The real effects of a new accounting standard: The case of IFRS 15 Revenue from Contracts with Customers. Accounting and Business Research, 50(5), 474-503. https://doi.org/10.1080/00014788.2020.1770933
What the ACC 317 Module 4 instructions ask for
Project One in ACC 317 typically asks you to apply ASC 606, Revenue from Contracts with Customers, to a realistic contract. Expect to work through the five steps: identify the contract, identify the performance obligations, determine the transaction price including any variable consideration, allocate the price to the obligations on a relative standalone selling price basis and recognize revenue when or as each obligation is satisfied. Most versions ask for journal entries and the effect on the year's statements, such as a contract liability or receivable, and for a written explanation of judgments in APA 7. Cite the standard for each step, show the allocation in a schedule and explain whether each obligation is satisfied at a point in time or over time.
How this ACC 317 Module 4 project one example is built
The sample analyzes a contract with a mountain resort for 24 tubs, installation, three years of maintenance, a three-year app subscription and a $12,000 bonus if tubs are installed before May 1. Step one confirms that a contract exists. Step two finds four distinct performance obligations and explains why the standard one-year warranty is not one of them. Step three includes the bonus in the price at its most likely amount, giving $316,920. Step four allocates the price using standalone prices that total $333,600, a 5 percent discount spread across all four promises. Step five recognizes tubs and installation in April and maintenance and the app evenly over 36 months, leaving a $26,600 contract liability at December 31.
Where the ACC 317 Module 4 rubric puts the points
Rubrics for ACC 317 Project One usually score each of the five steps, the journal entries and the explanation of judgments, plus organization and APA 7. The top band requires a correct identification of distinct performance obligations with reasons, a defensible estimate of variable consideration with the constraint considered, an allocation schedule that sums to the transaction price and revenue timing that matches how control transfers. Graders reward papers that explain judgments such as why installation is distinct or why a warranty is or is not a separate obligation. Common deductions include allocating a discount to only one item, recognizing service revenue at the start of the contract and leaving out the contract liability.
ACC 317 Module 4 help: the mistakes that cost points
The most frequent errors in this project are treating the whole contract as one performance obligation, allocating the discount to a single item, ignoring variable consideration or including it without considering the constraint, and recognizing multi-year service revenue at signing. Students also confuse assurance warranties, which are accrued as costs, with service warranties, which are performance obligations. If your contract involves a software license, a customer option, a return right or a principal versus agent question, send it and the analysis will follow those facts. Build the allocation schedule first and check that the allocated amounts add exactly to the transaction price before writing any entries.
Get ACC 317 Module 4 written to your instructions
Send the ACC 317 Project One guidelines and the contract facts. The paper will work through all five ASC 606 steps, explain each judgment, allocate the price with a schedule and show the journal entries and year-end balances. The first one costs nothing and is typically ready in two days. The paper above is an original model document written by our desk, not a submitted student paper and not an official Southern New Hampshire University document.
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ACC 317 Module 4 questions, answered
Where can I find a free ACC 317 Module 4 Project One sample?
This page carries a full ACC 317 Module 4 Project One applying the five ASC 606 steps to a bundled hot tub contract with a resort.
What are the five steps of ASC 606?
Identify the contract, identify the performance obligations, determine the transaction price, allocate the price to the performance obligations and recognize revenue when or as each obligation is satisfied.
When is a promised good or service distinct under ASC 606?
When the customer can benefit from it on its own or with readily available resources, and the promise is separately identifiable from other promises in the contract.
How is variable consideration estimated?
Using either the expected value or the most likely amount, whichever better predicts the amount, and included only to the extent a significant reversal is not probable.
Is a standard warranty a performance obligation?
An assurance-type warranty that only promises the product works as specified is not; its cost is accrued. A warranty that provides an additional service is a separate performance obligation.