Page 179 - F2 Integrated Workbook STUDENT 2019
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Revenue from contracts with customers
Example 7.5
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?
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