Clemons Auto Parts enters a contract with Sherlock Inc. to sell three different products for a total of $900,000. Each product is considered to be a separate performance obligation. Using the information in the table below, determine the allocation of the transaction price to each product using the Residual Value Approach.
|
Product |
Stand-Alone Price |
Market Price |
Forecasted Cost |
|
A |
Not Available |
$200,000 |
$170,000 |
|
B |
$260,000 |
$230,000 |
$200,000 |
|
C |
$420,000 |
$660,000 |
$510,000 |
Product A Transaction Price $________________________
Product B Transaction Price $________________________
Product C Transaction Price $________________________
Under Residual approach transaction price is found by reducing standalone prices from Total contract price. Now Product B and C has stand alone prices, thu Standalone price of product A can be determined by reducing standalone costs of Product B and C from total price.
Product B Transaction Price = Standalone price = $260,000
Product C Transaction Price = Standalone price = $420,000
Product A Transaction Price = Total Price - Standalone price of B and C = $900,000 - $260,000 - $420,000 = $220,000
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