ACCA Strategic Professional · Strategic Business Reporting (International) · Revenue
Orion Co sells a handset and a 24-month network service package to a customer for a total of $1,200. Standalone selling prices are handset $600 and service $900. Handset control passes at inception and the service is provided evenly over 24 months. What revenue does Orion recognise for the handset at inception?
Orion recognises $480 for the handset at inception. The $1,200 transaction price is allocated by relative standalone selling prices: 600 divided by 1,500 times 1,200 gives $480, with the remaining $720 recognised over the 24-month service period.
- A$600
- B$480Correct
- C$720
- D$1,200
Explanation
Total standalone prices are $1,500. The handset's allocation is 600/1,500 × 1,200 = $480, and the service is 900/1,500 × 1,200 = $720. Check: 480 + 720 = 1,200. Recognising $600 uses the standalone price instead of the allocated price, and $720 is the service allocation.
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