Value Dealership Inc. markets and sells vehicles to retail customers. Along with a new vehicle purchase, a customer will receive a free annual maintenance contract for one year from the date of purchase.The standalone selling price of a vehicle is $18,000 and the standalone selling price for the annual maintenance contract is $367. During October, Value Dealership Inc. sold 18 vehicles for $18,150 pervehicle, each with a free annual maintenance contract.•Note: Carry all decimals in calculations; round the final answer to the nearest dollar.•Note: If a line of the journal entry isn't required for the transaction, select "N/A" as the account name and leave the Dr. and Cr. answer blank (zero).a. Determine how the transaction price should be allocated among the performance obligation(s) and record the journal entry in October for Value Dealership's sale of 18 vehicles with the associatedmaintenance contracts to customers. Ignore the cost entry.Performance Obligations Transaction Price as Stated Standalone Selling Price Allocated Transaction Price (rounded)One VehicleAnnual maintenance contract$$Account NameTo record the sale of vehicles with associated maintenance contracts.0 $00 $$$Dr.0000 $00 $0 $00 $b. Assume the same information above except that the standalone selling price of the annual maintenance contract is not known because this was the first time Value Dealership offered the service. ValueDealership is uncertain as to what services, on average, a customer will take advantage of during the year of the contract. The Dealership researched competitor prices and determined that the averageselling price for a maintenance service contract is $384. Determine how the transaction price should be allocated among the performance obligation(s) and record the journal entry in October for ValueDealership's sale of 18 vehicles to its customers. Ignore the cost entry.Cr.Performance Obligations Transaction Price as Stated Standalone Selling Price Allocated Transaction Price (rounded)One VehicleAnnual maintenance contract0000 $00 $000000 Account NameTo record the sale of vehicles.CheckAccount Name$Dr.$To record the sale of vehicles.OOOc. Assume the same information (original scenario) above except that the standalone selling price of the annual maintenance contract is not known because this was the first time Value Dealership offerethe service. Value Dealership determined that the cost of the annual contract is $267 for the year and the expected profit margin on the service contract is 35%. Determine how the transaction priceshould be allocated among the performance obligation(s) and record the journal entry in October for Value Dealership's sale of 18 vehicles to its customers. Ignore the cost entry.0Performance Obligations Transaction Price as Stated Standalone Selling Price Allocated Transaction Price (rounded)One VehicleAnnual maintenance contractDr.00Cr.0000000 $00 $Cr.0000 $00 $000

Calculation of allocated transaction price as follows: Performance obligation Transaction price…

Value Dealership Inc. markets and sells vehicles to retail customers. Along with a new vehicle purchase, a customer will receive a free annual maintenance contract for one year from the date of purchase. The standalone selling price of a vehicle is $18,000 and the standalone selling price for the annual maintenance contract is $367. During October, Value Dealership Inc. sold 18 vehicles for $18,150 per vehicle, each with a free annual maintenance contract. •Note: Carry all decimals in calculations; round the final answer to the nearest dollar. •Note: If a line of the journal entry isn't required for the transaction, select "N/A" as the account name and leave the Dr. and Cr. answer blank (zero). a. Determine how the transaction price should be allocated among the performance obligation(s) and record the journal entry in October for Value Dealership's sale of 18 vehicles with the associated maintenance contracts to customers. Ignore the cost entry.

Value Dealership Inc. markets and sells vehicles to retail customers. Along with a new vehicle purchase, a customer will receive a free annual maintenance contract for one year from the date of purchase. The standalone selling price of a vehicle is $18,000 and the standalone selling price for the annual maintenance contract is $367. During October, Value Dealership Inc. sold 18 vehicles for $18,150 per vehicle, each with a free annual maintenance contract. •Note: Carry all decimals in calculations; round the final answer to the nearest dollar. •Note: If a line of the journal entry isn't required for the transaction, select "N/A" as the account name and leave the Dr. and Cr. answer blank (zero). a. Determine how the transaction price should be allocated among the performance obligation(s) and record the journal entry in October for Value Dealership's sale of 18 vehicles with the associated maintenance contracts to customers. Ignore the cost entry.

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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