ACCA Strategic Professional · Strategic Business Reporting (International) · Revenue
Kestrel Ltd sells a machine and a one-year maintenance service together for $120,000. Kestrel's standalone selling prices are $100,000 for the machine and $50,000 for the maintenance. Control of the machine passes at the start of the contract; maintenance is provided evenly over the year. Under IFRS 15, how much revenue is allocated to the machine?
$80,000 is allocated to the machine. IFRS 15 allocates the transaction price in proportion to relative standalone selling prices, so the machine gets 100/150 of $120,000. The discount is spread across both obligations rather than being assigned entirely to one item.
- A$60,000
- B$80,000Correct
- C$100,000
- D$120,000
Explanation
The transaction price is allocated in proportion to standalone selling prices. Total SSP is $150,000, so the machine receives 100/150 x $120,000 = $80,000 and maintenance $40,000. Allocating $100,000 to the machine ignores the bundle discount, and $60,000 incorrectly splits the price equally.
Did you get it right without looking?
One question tells you little. A timed set on Revenue shows your real accuracy, how long you take and where you lose marks.
More Revenue questions
- Orla Ltd's finance director asks the group accountant to allocate the whole discount on a bundled contract to a service delivered over three…
- Dalton Co sells goods to a customer for $200,000 with a volume rebate. Dalton estimates a 70% probability the customer will qualify for a $2…
- Orla Co's finance director proposes to record the full expected $400,000 performance bonus from a customer as revenue in the current year to…
- On 1 January 20X1 Rina Co delivers goods to a customer that will pay $1,210,000 on 31 December 20X2. Control passes on delivery. The discoun…
- Zeta Travel operates an online platform on which hotels list rooms. Zeta sets no prices, bears no inventory risk and has no obligation to pr…
- Kestrel Co has a fixed-price contract of $800,000 to construct a facility, satisfied over time. Total expected costs are $600,000 and, at th…