Falcon Ltd is a software company and in on 1st of Oct 2020 it sold its software product to Mira Ltd for a total of £600,000 which includes the provision of support service for the next 3 years. Without a support service, a software is sold to other customers at £460,000. Support service can be provided separately at £80,000 per year. Required: Explain how this transaction should be accounted for in financial statements for year ending 31 Dec 2020. Note: Ignore any discounting.

Falcon Ltd is a software company and in on 1st of Oct 2020 it sold its software product to Mira Ltd for a total of £600,000 which includes the provision of support service for the next 3 years. Without a support service, a software is sold to other customers at £460,000. Support service can be provided separately at £80,000 per year. Required: Explain how this transaction should be accounted for in financial statements for year ending 31 Dec 2020. Note: Ignore any discounting.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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