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: O Defer the entire $500 and recognize over the support period. 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.

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 6MC
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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.
Transcribed Image Text: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.
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