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27 July, 21:29

On November 1, 2019, Gerakos Corporation sold software and a six-month technical support contract to a customer for $80,000. Gerakos sells the same software without technical support for $60,000. It sells technical support for $30,000. Gerakos allocates the transaction price based on relative stand-alone values.

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  1. 28 July, 01:25
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    Complete Question is:

    On November 1, 2019, Gerakos Corporation sold software and asix-month technical support contract to a customer for $80,000. Gerakos sells the same software without technical support for$60,000. It sells technical support for $30,000. Gerakos allocatesthe transaction price based on relative stand-alone values.

    Required:

    What amount of revenue does Gerakos recognize in 2019 and in2020?

    Answer:

    Here the amount of software and technical support is bifurcated based on their individual prices

    Software = 80000*60000/90000 = 53,333

    Technical support = 80000*30000/90000 = 26667

    The pending technical support is for four months 26,667*4/6 = 17778

    The revenue to be recognized in 2020 is 17778

    The revenue to be recognized in 2019 is 80000-17778 = 62222
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