Question

Skippers Landing sells boats and provides mooring facilities for its customers. Skippers Landing sells the boats for $60,000 each and provides mooring facilities for $10,000 per year. It concludes that the goods and services are distinct and accounts for them as separate performance obligations. Skippers Landing enters into a contract to sell a boat and one year of mooring services to a customer for $65,000. Required: How should Skippers Landing allocate the transaction price of $65,000 to the performance obligations

Answer 1

Answer:

Skippers Landing should allocate the transaction price of $65,000 to the performance obligations as follows:

Boat = $60,000/$70,000 x $65,000 = $55,714

Mooring facilities = $10,000/$70,000 x $65,000 = $9,286

Explanation:

To apply "IFRS 15 Revenue from Contracts with Customers," Skipper Landing will allocate the transaction price to each performance obligation for each boat and mooring facilities sold based on the proportion of the relative stand-alone selling prices of each boat and mooring facilities sold to the customer in the transaction.