Performance Obligation Fulfilled Over Time Philbrick Company signed a three-year contract to develop custom sales training materials and provide training to the employees of Elliot Company. The contract price is $1,100 per employee and the number of employees to be trained is 500. Philbrick can send a bill to Elliot at the end of every training session. Once developed, the custom training materials will belong to Elliot Company, but Philbrick does not consider them to be a separate performance obligation. The expected number to be trained in each year and the expected development and training costs follow. Number of employees Development and training costs incurred 2019
150 $
55,000
2020
250
70,000
2021
100
20,000
Total 500 $145,000
For each year, compute the revenue, expense, and gross profit reported assuming revenue is recognized over time using... 1. the number of employees trained as a measure of the value provided to the customer. Note: Round answers to the nearest dollar.

Philbrick Company

Performance Obligation Fulfilled Over Time

Computation of the revenue, expense, and gross profit:

Year    Number of     Development     Sales            Gross

          Employees    /Training Cost     Value            Profit

2019          150            $ 55,000           $165,000      $110,000

2020       250               70,000             275,000      205,000

2021         100               20,000               110,000        90,000

Total       500          $145,000          $550,000   $405,000

Explanation:

a) Data and Calculations:

Contract price = $1,100 per employee

No. of employees to be trained = 500

Total contract value = $550,000 ($1,100 * 500)

Expected Development and Training Costs:

Year    Number of     Development

          Employees    /Training Cost

2019          150                $ 55,000

2020       250                    70,000

2021         100                    20,000

Total       500               $145,000

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