Sullivan Software sells packages of a software program and one year's worth of technical support for $500. Its packaging lists the $500 sales price as comprised of a software program at a price of $450 and technical support with a price of $100, with a $50 discount for the package deal. All of Sullivan's sales are for cash, and there are no returns. Sullivan sells the software program separately for $475 and offers a year of technical support separately for $75. The amount of revenue that GAAP, regarding software revenue recognition, would require Sullivan to attribute to the software program (as opposed to the technical support) is (rounded):

Sullivan Software sells packages of a software program and one year's worth of technical support for $500. Its packaging lists the $500 sales price as comprised of a software program at a price of $450 and technical support with a price of $100, with a $50 discount for the package deal. All of Sullivan's sales are for cash, and there are no returns. Sullivan sells the software program separately for $475 and offers a year of technical support separately for $75. The amount of revenue that GAAP, regarding software revenue recognition, would require Sullivan to attribute to the software program (as opposed to the technical support) is (rounded):

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 15RE: GameDay sells recreational vehicles along with secure parking storage to customers. Game Day sells...

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Sullivan Software sells packages of a software program and one year's worth of technical support for $500. Its packaging lists the $500 sales price as comprised of a software program and technical support. All of Sullivan's sales are for cash, and there are no returns. Sullivan sells the software program separately for $475 and offers a year of technical support separately for $75. Sullivan should recognize revenue for the two parts of the arrangement as follows: Defer the entire $500 and recognize over the support period. O Recognize the portion of the $500 attributable to the software program when the customer pays cash to buy the package; defer the portion attributable to technical support and recognize over the support period. Recognize the entire $500 when the customer pays cash to buy the package. Recognize the entire $500 upon conclusion of the support period.
Orange, Inc., sells a LearnIt-Plus software package that consists of their normal LearnIt math tutorial programalong with a one-year subscription to the online LearnIt Office Hours virtual classroom. LearnIt-Plus retails for$200. When sold separately, the LearnIt math tutorial sells for $150, and access to the LearnIt Office Hours sellsfor $100 per year. When should Orange recognize revenue for the parts of this arrangement? Would your answerchange if Orange did not sell the LearnIt Office Hours separately, but believed it would price it at $100 per yearif they ever decided to do so?
Blossom Company sells 320 units of its products for $20 each to Wildhorse inc. for cash. Blossom allows Wildhorse to return any unused product within 30 days and receive a full refund. The cost of each product is $11. To determine the transaction price, Blossom decides that the approach that is most predictive of the amount of consideration to which it will be entitled is the probability weighted amount. Using the probability-weighted amount. Blossom estimates that (1) 7 products will be returned, and (2) the returned products are expected to be resold at a profit. Prepare the journal entries for Blossom at the time of the sale to Wildhorse including any expected returns. The company follows IFRS. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter "0" for the amounts. List all debit entries before credit entries.) Account Titles and Explanation Cash (To record…
Leo Consulting enters into a contract with Highgate University to restructure Highgate’s processes for purchasing goods from suppliers. The contract states that Leo will earn a fixed fee of $25,000 and earn an additional $10,000 if Highgate achieves $100,000 of cost savings. Leo estimates a 50% chance that Highgate will achieve $100,000 of cost savings. Assuming that Leo determines the transaction price as the expected value of expected consideration, what transaction price will Leo estimate for this contract?
* Your answer is incorrect. Crane Company sells 302 units of its products for $20 each to John Inc. for cash. Crane allows John to return any unused product within 30 days and receive a full refund. The cost of each product is $13. To determine the transaction price, Crane decides that the approach that is most predictive of the amount of consideration to which it will be entitled is the probability-weighted amount. Using the probability-weighted amount, Crane estimates that (1) 9 products will be returned and (2) the returned products are expected to be resold at a profit. (a) Indicate the amount of net sales. Net sales $ (b) Indicate the amount of estimated liability for refunds. Liability for refunds $ Cost of goods sold 5869 (c) Indicate the amount of cost of goods sold that Crane should report in its financial statements Lassume that none of the products fave been returned at the financial statement date) 5 eTextbook and Media 171 Q Search 3913 (7
UniTel Co provides a bundled-service package to B. Mann for $4,200 upfront. The service package includes upfront advice, 'on-call' advice, and database access for a 1-year period. If each service was sold separately to B. Mann the fees would be: Up-front advice: $900 On-call advice: $1,800 Database access: $2,700 Using the relative fair value approach, what is the amount of revenue recognised in relation to the on-call advice is (rounded to the nearest whole dollar): O $700 O $1,400 $1,800 $2,100
Sarjit Systems sold software to a customer for $80,000. As part of the contract, Sarjit promises to provide “free” technical support over the next six months. Sarjit sells the same software without technical support for $70,000 and a stand-alone six-month technical support contract for $30,000, so these products would sell for $100,000 if sold separately. Prepare Sarjit’s journal entry to record the sale of the software.
Lake Power Sports sells jet skis and other powered recreational equipment. Customers pay one-third of the sales price of a jet ski when they initially purchase the ski, and then pay another one-third each year for the next two years. Because Lake has little information about the ability to collect these receivables, it uses the installment sales method for revenue recognition. In 2020, Lake began operations and sold jet skis with a total price of $1,050,000 that cost Lake $525,000. Lake collected $350,000 in 2020, $350,000 in 2021, and $350,000 in 2022 associated with those sales. In 2021, Lake sold jet skis with a total price of $1,770,000 that cost Lake $1,062,000. Lake collected $590,000 in 2021, $525,000 in 2022, and $525,000 in 2023 associated with those sales. In 2023, Lake also repossessed $130,000 of jet skis that were sold in 2021. Those jet skis had a fair value of $48,750 at the time they were repossessed.Total cash collections on installment sales during 2021 would be:…
Lake Power Sports sells jet skis and other powered recreational equipment. Customers pay one-third of the sales price of a jet ski when they initially purchase the ski, and then pay another one-third each year for the next two years. Because Lake has little information about the ability to collect these receivables, it uses the cost recovery method to recognize revenue on these installment sales. In 2020, Lake began operations and sold jet skis with a total price of $630,000 that cost Lake $315,000. Lake collected $210,000 in 2020, $210,000 in 2021, and $210,000 in 2022 associated with those sales. In 2021, Lake sold jet skis with a total price of $1,380,000 that cost Lake $828,000. Lake collected $460,000 in 2021, $260,000 in 2022, and $260,000 in 2023 associated with those sales. In 2023, Lake also repossessed $400,000 of jet skis that were sold in 2021. Those jet skis had a fair value of $150,000 at the time they were repossessed. In 2020, Lake would recognize realized gross profit…
Flint Company sells tablet PCs combined with Internet service, which permits the tablet to connect to the Internet anywhere and set up a Wi-Fi hot spot. It offers two bundles with the following terms. 1. Flint Bundle A sells a tablet with 3 years of Internet service. The price for the tablet and a 3-year Internet connection service contract is $481. The standalone selling price of the tablet is $225 (the cost to Flint Company is $174). Flint Company sells the Internet access service independently for an upfront payment of $308. On January 2, 2020, Flint Company signed 100 contracts, receiving a total of $48,100 in cash. 2. Flint Bundle B includes the tablet and Internet service plus a service plan for the tablet PC (for any repairs or upgrades to the tablet or the Internet connections) during the 3-year contract period. That product bundle sells for $586. Flint Company provides the 3-year tablet service plan as a separate product with a standalone selling price of $152. Flint…
Westinghouse Company, a producer of washing machines, sells various customers. It has a contract to deliver 10 fully automatic washing machines to Soft and Wash Company for a total price of P400,000. The contract contains a clause for free repairs and maintenance services for a period of two years from date of purchase. Soft & Wash paid 50% of the price and half after 3 months. 1. How much sales revenue vill be recognized by Westinghouse on this sale? P400,000 b. P100,000 а. C. P200,000 d. No revenue
Oriole Company sells 455 units for $290 each to Sheffield Inc. for cash. Oriole allows Sheffield to return any unused product within 30 days and receive a full refund. The cost of each product is $174. To determine the transaction price, Oriole decides that the approach that is most predictive of the amount of consideration to which it will be entitled is the most likely amount. Using the most likely amount, Oriole estimates that ten (10) units will be returned, the costs of recovering the units will be immaterial, and the returned units are expected to be resold at a profit. What amount of refund liability should Oriole record at the time of sale? $1740 O $2900 $1160 O $0