The AC501 Unit 7 revenue arrangement analysis here takes one composite drone contract through ASC 606, allocating 600,000 across four obligations and recognizing 407,946 in six months. Searches like "ac 501 unit 7 assignment example", "ac501 unit 7 sample" and "ac501 unit 7 example" land here.
What a finished AC501 Unit 7 revenue arrangement analysis looks like
Six pages following the five steps, with two schedules. Step two identifies four performance obligations: the drones, the 36-month mapping subscription, pilot training, and an option to buy up to four more drones at 35 percent below the price other cooperatives pay, treated as a material right under ASC 606-10-55-42. Step three adds the 60,000 uptime bonus to the 540,000 fixed price, using the most likely amount and testing the constraint against 19 of 22 prior contracts that met the target. Step four allocates the fixed price by standalone selling prices totaling 608,600, drones 362,011, subscription 119,783, training 15,971 and the option 42,235, and assigns the whole bonus to the subscription. Step five recognizes 407,946 in the first six months and defers 192,054.
How a AC501 Unit 7 example is structured
The five steps give the order, but the weight falls where the judgment is. Step one takes a sentence. Step two argues distinctness for each promise, with particular attention to the software, which works without these drones and is sold separately, and to the option, where the discount is compared with what the cooperative could get without this contract. Step three explains the estimation method chosen for a binary bonus and applies the constraint with evidence rather than assertion. Step four builds the option's standalone selling price from the discount per drone, the number of drones and a 50 percent likelihood of exercise, and cites ASC 606-10-32-40 for assigning the bonus to one obligation. Step five schedules revenue by obligation and period. Last comes the alternative reading, the option as an ordinary discount, and what it would change.
Four obligations, one argued hard
Drones, subscription and training separate easily. The option takes a full paragraph, because only an incremental discount makes it a performance obligation.
A bonus estimated and constrained
The most likely amount suits an all-or-nothing payment, and 19 of 22 comparable contracts meeting the target supports including all 60,000.
Pricing an option nobody has used
A discount of 23,800 per drone, up to four drones and an even chance of exercise give the option a standalone selling price of 47,600.
Variable consideration to one obligation
Uptime depends on the subscription service alone, so the bonus is allocated there in full rather than spread across the drones and training.
Revenue by obligation and period
Drones and training at delivery, the subscription ratably over 36 months, the option when exercised or lapsed: 407,946 recognized and 192,054 deferred at six months.
Where marks go in AC501 Unit 7
Analyses that list the five steps and apply them mechanically, allocating by list price and recognizing everything at delivery, earn little at this level, since the arrangement was built around two judgments. Missing the material right is the classic technical loss: treating the option as a marketing offer understates deferred revenue. Spreading the bonus across every obligation without testing the allocation exception comes next. Including or excluding variable consideration without addressing the constraint leaves step three unsupported, and graders look for the evidence behind the estimate. Many sections also check that the allocation sums to the transaction price and that the schedule reconciles to it. Citations at topic level only, ASC 606 with no paragraph references, and a closing that never considers the alternative reading of the option cost smaller amounts.
Get a AC501 Unit 7 example written to your instructions
Paste the contract terms your unit supplies, with standalone prices if given, plus the Unit 7 prompt and rubric. The analysis written for you argues distinctness for each promise, estimates and constrains any variable amounts, allocates the price with paragraph citations and schedules the revenue. A first sample is free, usually within 24-48h.
AC501 Unit 7 questions, answered
When is a customer option a material right?
When it gives the customer a discount it would not receive without entering the contract, one incremental to the range normally offered to that class of customer. Here the cooperative's 35 percent discount exceeds what similar buyers receive, so the option is a separate obligation. An option at the usual price is simply a marketing offer and takes no allocation.
Why allocate the whole bonus to the subscription?
ASC 606-10-32-40 permits allocating variable consideration entirely to one obligation when the payment terms relate specifically to it and the result is consistent with the allocation objective. The uptime target depends on the mapping service, not on drones already delivered. Spreading the bonus would recognize part of it at delivery for performance that had not yet occurred.
What happens if the cooperative never exercises the option?
The 42,235 allocated to the option is recognized when drones are bought, in proportion to the number purchased, or when the right lapses at the end of the three-year window. The sample describes both outcomes, so a reader can see that the deferred balance resolves either way rather than sitting on the balance sheet indefinitely.