Question

Gore Inc. sells office furniture. In 2021, it sold 200 desks for $500 each. For each desk sold, Gore distributed a 50% discount coupon for purchase of an office chair within one month. Based on historical experience, Gore expects that approximately 20% of the coupons will be utilized. The chairs purchased with the coupons are priced at $150 and normally discounted 10%. What would be the stand-alone sales price used by Gore for the coupon when allocating the $500 transaction price to performance obligations

Answer 1

Answer:

$12

Explanation:

Stand alone sale price = (Cost of chair) * (Discount % of voucher-Normal% of discount) * (% of coupons to be utilized)

Stand alone sale price = $150 * (50%-10%) * 20%

Stand alone sale price = $150 * 40% * 20%

Stand alone sale price = $12

Therefore, the Stand alone selling price used by Gore Inc. is $12