Question

Carryon Company sells a product and a 12-month service package for that for a combined price...

Carryon Company sells a product and a 12-month service package for that for a combined price of $700. Separately, the product and the service sell for $350 and $550, respectively. At the time of purchase, how much of the combined sales price should be credited to deferred revenue?

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Answer #1

Combined price = $700

Separate price of product = $350

Separate price of service = $550

Total separate price of product and service = Separate price of product+ Separate price of service =
= 350+550

= $900

Combined sale price allocated to service = Combined price x Separate price of service/Total separate price of product and service

= 700 x 550/900

= $428 (Rounded to whole number)

Amount to be credited to Deferred revenue = $428

Kindly comment if you need further assistance. Thanks

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