Question

Fuhremann Co. is a full-service manufacturer of surveillance equipment. Customers can purchase any combination of equipment, installation services, and training as part of Fuhremann's security services. Thus, each of these performance obligations are separate with individual standalone selling prices. Laplante Inc. purchased cameras, installation, and training at a total price of $80,000. Estimated standalone selling prices of the equipment, installation, and training are $90,000, $7,000, and $3,000, respectively. How should the transaction price be allocated to the equipment, installation, and training

Answer 1

Answer:

Equipment transaction price is $72,000

Installation transaction price $5,600

Training transaction price is $2,400

Explanation:

The transaction price of $80,000 should be allocated to the equipment,installation and training based on the individual stand-alone prices of each as calculated below:

Transaction price of an item=transaction price*item stand-alone price/total of stand-alone prices

transaction price is $80,000

total stand-alone prices=$90,000+$7000+$3000

                                      =$100,000

Equipment transaction price=$80,000*$90,000/$100,000

                                               =$72,000

Installation transaction price=$80,000*$7000/$100.000

                                               =$5,600

Training transaction price=$80,000*$3000/$100,000

                                          =$2,400