**Educational Content: Accounting for Transaction Prices****Scenario:**On 06/19/20XX, Integrative Solutions Consulting sold software to a customer for $250,000 with "free" tech support for six months. Integrative Solutions sells the same software without technical support for $240,000 and a stand-alone six-month tech support contract for $60,000. Thus, when sold separately, the software and technical support sells for $300,000. **Task:**Prepare Integrative Solutions' journal entry to record the sale on June 19th, showing your calculation for allocating the transaction price.**Solution:**1. **Identify the Components of the Sale:** - Software: Typically sold for $240,000 - Tech Support: Typically sold for $60,000 2. **Total Stand-Alone Selling Price:** - $240,000 (Software) + $60,000 (Tech Support) = $300,0003. **Total Transaction Price:** - $250,000 (Discounted package deal price)4. **Calculate the Allocation of Transaction Price:** Using the relative stand-alone selling price method: - Software: $( \frac{240,000}{300,000} ) \times 250,000 = \$200,000$ - Tech Support: $( \frac{60,000}{300,000} ) \times 250,000 = \$50,000$5. **Journal Entry on June 19th:** - **Debit Accounts Receivable:** $250,000 - **Credit Revenue—Software Sales:** $200,000 - **Credit Deferred Revenue—Tech Support:** $50,000**Explanation:**This entry reflects the recognition of revenue for the software and deferral of revenue for the tech support, which will be recognized over the support period. This approach ensures compliance with revenue recognition standards by accurately allocating and recognizing revenue based on the actual selling prices and benefits delivered to the customer.

Part 4: On 06/19/202X, Integrative Solutions Consulting sold software to a customer for $250,000 with "free" tech support for six months. Integrative Solutions sells the same software without technical support for $240,000 and a stand-alone six-month tech support contract for $60,000. Thus, when sold separately, the software and technical support sells for $300,000. Prepare Integrative Solutions journal entry to record the sale on June 19" (show your calculation for allocating the transaction price).

Part 4: On 06/19/202X, Integrative Solutions Consulting sold software to a customer for $250,000 with "free" tech support for six months. Integrative Solutions sells the same software without technical support for $240,000 and a stand-alone six-month tech support contract for $60,000. Thus, when sold separately, the software and technical support sells for $300,000. Prepare Integrative Solutions journal entry to record the sale on June 19" (show your calculation for allocating the transaction price).

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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