On February 1, 2014, Coconut entered into an arrangement with Buffett Worldwide Inc. (Buffett), a restaurant servicer, to deliver the Volcano System and provide one year of post-contract customer support (PCS) beginning March 1, 2014. Buffett paid $12,000 on February 1, 2014, for the Volcano System and the related PCS. The PCS includes telephone support, repair or replacement of defective parts, any available software updates, and any necessary bug fixes for the software. There is no general right of return on the arrangement. Coconut determined that the arrangement consists of the following two units of accounting with the respective standalone relative selling prices:

1. Customer management system:                $12,000

2. One year of PCS:                                        $2,000

On March 1, 2014, and in a separate contract, Coconut agreed to provide Buffett with (1) training services on the customer management system and (2) an additional year of PCS. Under the terms of this agreement, Buffett immediately paid consideration of $4,500 for the additional services. Coconut determined that the standalone relative selling price of the training services and additional PCS were $3,000 and $2,000, respectively. At the time of execution of this agreement, the customer management system had been delivered and all other revenue recognition criteria related to the system were met. The training services are scheduled to begin on June 1, 2014.

Required:

It is now May 15, 2014. The CFO of Coconut has learned about the release of ASU 2014-09 (the new revenue recognition system) and would like to understand what Coconut's financial statements will look like under the new standard. The CFO has hired you, a consultant, to prepare a report and asks that you cite all sources of information that you use in footnotes. Specifically, she would like the following questions answered:

1. Under the new standard, should the March 1, 2014, agreement be accounted for as a modification of the February 1 agreement or as a new agreement?

2. Whatever your answer to Question 1 is, is it possible to achieve the opposite result by changing the structure and/or timing of the contracts? i.e., if the answer to Q1 is that they are treated separately, is there a way to alter the facts that would result in them treated as a single arrangement (and vice versa)?

3. On the basis of your response to Question 1, how should Coconut account for the execution of the March 1, 2014, agreement? Provide the deferred revenue balance and cumulative revenue recognized related to the Buffett arrangement upon execution of the March 1, 2014, agreement (i.e., what are these two amounts as of March 1, 2014)?