Shaw company sold a piece of machinery to Ricard Company for $750,000 on April 2,2017. The sales prices included installation and a one-year maintainence service. The standalone selling price of the machinery and installation is $708,400. The maintainence service is considered a seperate performance obligation and has a standalone price of $61,600. 1.How should the transaction price be allocated among the performance obligations? 2.Prepare the journal entry to record the sale on April 2,2017. 3.Assume shaw company has a december 31 year-end prepare any necesarry year-end entry related to the sale of the machinery
1. Total price = $708,400 + $61,600 = $770,000
Standalone price = $750,000
% of consideration to Standlone price = $750,000 / $770,000 = 97.40%
Allocation of Consideration among:
Machinery sales (708400*97.40%) = $690,000
Service (61600*97.40%) = $60,000
2.
| No. | Account Titles | Debit | Credit |
| 2 | Cash | $750,000 | |
| Sales revenue | $690,000 | ||
| Unearned Maintenance service revenue | $60,000 | ||
| 3 | Unearned Maintenance Service revenue | $45,000 | |
| Maintenance Service revenue (60000*9/12) | $45,000 |
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