Ajax enters into a contract to sell a machine for 120,000 (excluding value added tax). Control over the machine transfers to the customer on delivery. Under the sales contract, Ajax has also committed to provide an extended warranty and maintenance on the machine for five years. Payment of 90,000 is due on delivery with the balance due in six months. Ajax routinely sells this type of machine for 120,000 on a stand-alone basis, and it also offers a five-year maintenance service on machines of this type for 30,000, which Ajax estimates will cost it 15,000 to provide. The transaction price should be allocated as follows:

Select one:

120,000 for the machine and 0 for the service agreement

105,000 for the machine and 15,000 for the service agreement

96,000 for the machine and 24,000 for the service agreement

90,000 for the machine and 30,000 for the service agreement