Allocating Transaction Price to Performance Obligations and Recording Sales Value Dealership Inc. markets and sells vehicles to retail customers. Along with a new vehicle purchase, a customer will receive a free annual maintenance contract for one year from the date of purchase. The standalone selling price of a vehicle is $42,000 and the standalone selling price for the annual maintenance contract is $857. During October, Value Dealership Inc. sold 42 vehicles for $42,350 per vehicle, each with a free annual maintenance contract. Note: Carry all decimals in calculations; round the final answer to the nearest dollar. Note: If a line of the journal entry isn't required for the transaction, select "N/A" as the account name and leave the Dr. and Cr. answer blank (zero). a. Determine how the transaction price should be allocated among the performance obligation(s) and record the journal entry in October for Value Dealership's sale of 42 vehicles with the associated maintenance contracts to customers. Ignore the cost entry. Performance Obligations Transaction Price as stated Standalone Selling Price Allocated Transaction Price (rounded) One Vehicle Annual maintenance contract S 42.350 5 42.350x 84700 S 42,000 $ 857 42857 $ 42.503 x 857 43360 Account Name Dr. Cr. Cash 1,821,120 0x Sales Revenue-Vehicle Deferred Maintenance Revenue 0 1,785,126 x 0 35,994 x To record the sale of vehicles with associated maintenance contracts. we b. Assume the same information above except that the standalone selling price of the annual maintenance contract is not known because this was the first time Value Dealership offered the service. Value Dealership is uncertain as to what services, on average, a customer will take advantage of during the year of the contract. The Dealership researched competitor prices and determined that the average selling price for a maintenance service contract is $896. Determine how the transaction price should be allocated among the performance obligation(s) and record the journal entry in October for Value Dealership's sale of 42 vehicles to its customers. Ignore the cost entry. Performance Obligations Transaction Price as Stated Standalone Selling Price Allocated Transaction Price (rounded) One Vehicle $ Annual maintenance contract 42,350 $ 42,350 x 84700 5 Account Name Dr. Cr. Cash 1,779,162 0x Sales Revenue-Vehicle 0 1,741,530 v Deferred Maintenance Revenue 0 37,632 x To record the sale of vehicles. 42,000 $ 896 42896 $ 41,465 885 42350 WD cove c. Assume the same information (original scenario) above except that the standalone selling price of the annual maintenance contract is not known because this was the first time Value Dealership offered the service. Value Dealership determined that the cost of the annual contract is $623 for the year and the expected profit margin on the service contract is 35%. Determine how the transaction price should be allocated among the performance obligation(s) and record the journal entry in October for Value Dealership's sale of 42 vehicles to its customers. Ignore the cost entry. Performance Obligations Transaction Price as Stated Standalone Selling Price Allocated Transaction Price (rounded) One Vehicle Annual maintenance contract 42.350 S 42.350 x 84700 $ 42.000 $ 623 x 2331 42623 $E 41.731 x 619 x 42350 Account Name Dr. Cr. Cash 1,778.700 Sales Revenue-Vehicle Deferred Maintenance Revenue To record the sale of vehicles 0 1752.702 x 25.998 x