Question
Bella Company enters into a contract with a customer to sell three products for a total price of $15,000. Each product is appropriately classified as
Bella Company enters into a contract with a customer to sell three products for a total price of $15,000. Each product is appropriately classified as a separate performance obligation. Bella Company only sells the bricks and cement on an individual basis so it must estimate the standalone selling price for the stones. Information related to these three products is provided in the following table:
| Product | Standalone selling price | Market prices | Forecasted cost |
| Bricks | $6,200 | $6,300 | $5,500 |
| Cement | 8,000 | 7,200 | 5,000 |
| Stones | Not available | 4,500 | 2,000 |
How should Bella Company allocate the price to the three products using the market approach?
How should Bella Company allocate the price to the three products using the residual approach?
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Accounting and auditing research tools and strategies
Authors: Thomas Weirich, Thomas Pearson, Natalie Tatiana
8th edition
9781118806487, 1118027078, 1118806484, 978-1118027073
