Question

Meyer & Smith is a full-service technology company. They provide equipment, installation services as well as training. Customers can purchase any product or service separately or as a bundled package. Container Corporation purchased computer equipment, installation and training for a total cost of $180,000 on March 15, 2018. Estimated standalone fair values of the equipment, installation, and training are $90,000, $60,000, and $30,000 respectively.

The transaction price allocated to equipment, installation and training is :

a. $144,000 for the entire bundle.

b. $72,000, $48,000 and $24,000 respectively.

C. $48,000, $48,000, $48,000 respectively.

d. $90,000, $60,000, $30,000 respectively.

Answer 1

Answer:

d. $90,000, $60,000, $30,000 respectively.

Explanation:

The computation of price allocated is shown below:-

Ratio of values $90,000 : $60,000 : $30,000

= 3 : 2 : 1

Total cost = $180,000

Equipment = $180,000 × 3 ÷ 6

= $90,000

Installation= $180,000 × 2 ÷ 6

= $60,000

Training = $180,000 × 1 ÷ 6

= $30,000

Therefore the Equipment, Installation, Training is $90,000, $60,000, $30,000 respectively.