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Hi
Please see the following question.
Derringdo sells a package which gives customers a free laptop when they sign a two-year contract for provision of broadband services. The laptop has a stand alone price of $200 and the broadband contract is for $30 per month. What amount will be recognized as revenue on each package in the first year?
Could you please advise on how to resolve it while not having a stand alone price for broadband services?
Thank you!
Hi,
It is a tricky one but the customer is getting a free laptop when they sign up for a 2 year broadband package, so they are paying $720 for the combined package as is is $30/month for two years.
The standalone price of the laptop is given as $200, and the broadband standalone price is assumed to be the same $30/month. So if the laptop was not part of the deal we would e paying $920 in total. This is then allocated to the $720 payment as 200/920 and 720/920 for the laptop and broadband respectively.
Thanks
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