Question

Best Buy Electronics sells computers and provides hardware maintenance services. On April 1st, Best Buy sold a package deal containing a computer and a one-year unlimited maintenance/repair service for the computer at a bundle price of $1,000. If sold separately, the computer costs $840 and the one-year unlimited maintenance/repair service costs $360. How much revenue does Best Buy Electronics recognize for the month ended April 30th, assuming that revenue is accrued monthly?
a. $985.50
b. $19.50
c. $821.25
d. $1,000

Answer 1

Answer:

C. $725

Explanation:

Calculation to determine How much revenue does Best Buy Electronics recognize for the month ended April 30th, assuming that revenue is accrued monthly

Total cost if sold separately = 840 + 360

Total cost if sold separately = 1200

% of Computer = 840/1200

% of Computer= 70%

% of maintenance = 360/1200

% of maintenance= 30%

Revenue to be recognized for the month for computer

Revenue = 1,000 * 70%

Revenue = $700

Revenue to be recognized for the month for maintenance service costs

Revenue = (30% * 1000)/12

Revenue = 300/12

Revenue = $25

Total amount to be recognized =$700+ $25

Total amount to be recognized =$725

Therefore How much revenue does Best Buy Electronics recognize for the month ended April 30th, assuming that revenue is accrued monthly will be $725