On January 1, 2016, Lego Construction Company signed a contract to build a custo
ID: 2451391 • Letter: O
Question
On January 1, 2016, Lego Construction Company signed a contract to build a custom garage for a customer and received $10,000 in advance for the job. The new garage will be built on the customer's land. To complete this project, Lego must first build a concrete floor, construct wooden pillars and walls, and finally install a roof. Lego normally charges stand-alone prices of $3,000, $4,000, and $5,000, respectively, for each of these three smaller tasks if done separately. How many performance obligations exist in this contract?
Explanation / Answer
There are three performance obligations, building floor, constructing wooden pillars and walls, and installing a roof.
These three performances are distinct, since the company usually charge stand-alone price for each of these works.