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 $144,000 on March 15, 2021. Estimated standalone fair values of the equipment, installation, and training are $90,000, $60,000, and $30,000 respectively. Determine The transaction price allocated to equipment is The transaction price allocated to installation is The transaction price allocated to training is Express your answer as an integer without $ sign (Round all computations to the nearest dollar. For example, input "100,000" if your answer is $100,000.22).

Answer 1

Answer & Explanation:

If the services were sold separately, their total cost would be;

= 90,000 + 60,000 + 30,000

= $180,000

They were instead bundled together and sold for $144,000

The cost of the individual services will therefore be a proportion of this bundled price based on their proportion were they sold alone.

The transaction price allocated to equipment;

= (90,000/180,000) * 144,000

= $72,000

The transaction price allocated to installation;

= (60,000/180,000) * 144,000

= $48,000

The transaction price allocated to training;

= (30,000/180,000) * 144,000

= $24,000