Question

BoTeck is a full-service technology company. Ot provides equipment, installation services, and training services. Customers can purchase any product or service separately or as a bundled package. on May 3, Box-Rite Corporation purchased computer equipment, installation, and training for a total cost of $120,000. Estimated standalone fair values of the equipment, installation, and training are $120,000, $20,000, and $60,000 respectively. The transaction price allocated to equipment, installation and training is:_________

Answer 1

Answer and Explanation:

The computation of the transaction price allocated to the equipment, installation and the training is shown below:

Given that

Total cost = $120,000

And, the fair values of the equipment, installation, and training are $120,000, $20,000, and $60,000

Now the total fair value is

= $120,000 + $20,000 + $60,000

= $200,000

Now the allocation could be done in the following manner

Equipment = $120,000 × $120,000 ÷ $200,000 = $72,000

Installation = $120,000 × $20,000 ÷ $200,000 = $12,000

And, for training = $120,000 × $60,000 ÷ $200,000 = $36,000

Total cost $120,000