ACCA Applied Skills · Financial Reporting · Revenue
Brightwell Co sells a software licence together with a one-year technical support service for a total of $120,000. The stand-alone selling prices are licence $100,000 and support $50,000. The licence is a distinct performance obligation satisfied at a point in time on delivery, and support is satisfied evenly over the year. Brightwell delivers the licence on 1 October and its year end is 31 December. What revenue should Brightwell recognise in the year ended 31 December?
Revenue is $90,000. The $120,000 price is allocated in the ratio of stand-alone selling prices 2:1, giving $80,000 to the licence and $40,000 to support. The licence is recognised on delivery, and three months of support adds $10,000, totalling $90,000.
- A$80,000
- B$90,000Correct
- C$100,000
- D$120,000
Explanation
Allocate the price using relative stand-alone selling prices, total $150,000. Licence = 120,000 x 100/150 = $80,000; support = 120,000 x 50/150 = $40,000. Support for 3 months = 40,000 x 3/12 = $10,000. Total revenue = 80,000 + 10,000 = $90,000. The $100,000 distractor uses the licence stand-alone price rather than the allocated amount.
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