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Shinji Co sells a machine and one year’s free technical support for
$50,000. It usually sells the machine for $60,000 but does not sell
technical support for this machine as a stand-alone product. Other
support services offered by Shinji Co attract a mark-up of 50%. It is
expected that the technical support will cost Shinji Co $10,000.Required:
How should the transaction price be allocated between the machine
and the technical support?could you help with this question
Hi,
What specifically do you need help upon? I’d like to see some form of attempt at the question and then I can help you with what you do not understand. Doing it this way improves your learning.
To give you a start though, the key is that we have received $50,000 revenue and that needs to be split between the machine (goods) and the support services. To do this you need to allocate the $50,000 based on the stand alone prices using the $60,000 price of a machine and the cost plus aspect for the services.
Have a go and see how you get on. I’ll then check to see if you get it right and if not then I’ll point out where you have made the mistake.
Thanks
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