Page 56 - SBR Integrated Workbook STUDENT S18-J19
P. 56
Chapter 4
Example 5
Allocate the transaction price
Ben, a public limited entity, enters into a contract with a customer that
contains two performance obligations: to sell a machine, and to provide 12
months’ worth of technical support. The contract price is $1 million. The
machine has a stand-alone selling price of $900,000. Ben does not yet
provide a standalone service contract for this particular type of machine. It
makes a gross margin of 60% on other service contracts and estimates that it
will incur costs on the contract of $120,000.
How much of the transaction price should be allocated to each
performance obligation?
50
