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Superior Cars sold a car for $35,000 cash. In addition, changes per year for 5 years and an extended warranty for 5 years. The normal observable stand-alone selling prices are as follows: Car Oil change Service-type warranty $35,000 $50 per oil change $4,000 Required: 1. Determine how much of the revenue should be allocated to the various performance obligations in this transaction. 2. Based on the revenue recognition criteria when revenue should be recognized to the components in this transaction? Explain.

Superior Cars sold a car for $35,000 cash. In addition, changes per year for 5 years and an extended warranty for 5 years. The normal observable stand-alone selling prices are as follows: Car Oil change Service-type warranty $35,000 $50 per oil change $4,000 Required: 1. Determine how much of the revenue should be allocated to the various performance obligations in this transaction. 2. Based on the revenue recognition criteria when revenue should be recognized to the components in this transaction? Explain.

FINANCIAL ACCOUNTING
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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Superior Cars sold a car for $35,000 cash. In addition, the company will provide 4 oil changes per year for 5 years and an extended warranty for 5 years. The normal observable stand-alone selling prices are as follows: Car Oil change Service-type warranty $35,000 $50 per oil change $4,000 Required: 1. Determine how much of the revenue should be allocated to the various performance obligations in this transaction. 2. Based on the revenue recognition criteria when revenue should be recognized to the components in this transaction? Explain.
Transcribed Image Text:Superior Cars sold a car for $35,000 cash. In addition, the company will provide 4 oil changes per year for 5 years and an extended warranty for 5 years. The normal observable stand-alone selling prices are as follows: Car Oil change Service-type warranty $35,000 $50 per oil change $4,000 Required: 1. Determine how much of the revenue should be allocated to the various performance obligations in this transaction. 2. Based on the revenue recognition criteria when revenue should be recognized to the components in this transaction? Explain.
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