Question

Wildhorse Co. is a full-service manufacturer of surveillance equipment. Customers can purchase any combination of equipment, installation services, and training as part of Wildhorse’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 $88,100. Estimated standalone selling prices of the equipment, installation, and training are $81,000, $6,300, and $2,700, respectively. How should the transaction price be allocated to the equipment, installation, and training?

Answer 1

WeAnswer:

Equipment $79,290

Installation $6,167

Training $2,643

Explanation:

Calculation to determine How should the transaction price be allocated to the equipment, installation, and training

First step is to calculate the total estimated fair value

Total estimated fair value = $81,000+$6,300+$2,700

Total estimated fair value =$90,000

Now let calculate How should the transaction price be allocated

Equipment= ($81,000 ÷ $90,000)*$88,100

Equipment= 90%*$88,100

Equipment=$79,290

Installation=($6,300 ÷ $90,000)* $88,100

Installation= 7%*$88,100

Installation=$6,167

Training=($2,700 ÷ $90,000)*$88,100

Training= 3%*$88,100

Training=$2,643

TOTAL

Equipment=$81,000

Installation=$6,300

Training=$2,700

Total $90,000

Equipment=$79,290

Installation=$6,167

Training=$2,643

Total $88,100

Equipment=90%

Installation=7%

Training=3%

Total 100%

Therefore the transaction price that should be allocated to the equipment, installation, and training are :

Equipment $79,290

Installation $6,167

Training $2,643