Question

JCPenny entered into a contract with Emma. The contract begins on May 1 and ends on November 31, 2020. JCpenny will exchange 100 of their most popular watches at a discount as well as 100 glasses for brand-specific marketing. The regular wholesale price of the shirts is $65. JcPenny expects the cost to produce each mask will be $6. All goods that they sell have a profit margin of about 54%. Being able to carry these exclusive products is important to Emma so they have agreed to pay $7,000 in marketing over the life of the contract. JcPenny management recognizes $7,000 as revenue when the contract is signed on April 1st. Fifty shirt and mask sets will be delivered on May 1, twenty-five on June 1, and twenty-five on August 1.

1) Transaction price of Contract?

2) Estimate of Wholesale price  of glasses and Discount company Emma recieved on Watches

3)Allocation of Transaction price

Answer 1

1) Transaction price of the Contract = $ 7000.

2) Whole sale price of glass = $6*154% = $ 9.24 per glass

transaction price with respect to watch = $7000 - ($9.24*100glasses) = $6076 i.e 60.76 per watch.

Discount per cloth =$65 - $ 60.76 per watch = 4.24 per watch

Total discount received = 100 watch * $4.24 per watch = $424

(It is assumed margin of 54% is on Cost Price)

3)

Transaction price should be allocated between watch and glasses on the date of delivery as folllows.

Date	Particulars	Amount($)
May-01	50 watches @ $60.76 per watch	3038
	50 glasses @ $9.24 per glass	462
Jun-01	25 watches @ $60.76 per watch	1519
	25 glasses @ $9.24 per glass	231
Aug-01	25 watches @ $60.76 per watch	1519
	25 glasses @ $9.24 per glass	231
	Total	7000