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.

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. 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): $450. $475. O $432. $400.
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):
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