Question

Neakine Industries sells specialized mountain bikes. Each specialized bike purchased includes free maintenance service for 12 months. The price of the specialized bike is $1,700. When sold separately, a maintenance contract is $600 and a comparable but non-specialized bike is $1,400. What amount of revenue will Neakine recognize at the date of sale for each bike?

a.) $800

b.) $1400

c.)$1,190

d.)1,700

Answer 1

Neakine industries is selling the specialized bike with free annual maintenance.

maintenance of byket and servicing is an essential part or requirement of the customer. So for attract customers these type of techniques are used by the seller.

So maintenance of the byke is an essential part of the selling techniques, So sales revenue will include the vehicle + maintenance revenue given first time with sale of byke.

So total revenue will take for the bike is $ 1700

Answer = Option D = $ 1,700