Question
I'm wondering if anyone can help me answer 3 multiple questions that I am having trouble with, the chapter that I am studying is on
I'm wondering if anyone can help me answer 3 multiple questions that I am having trouble with, the chapter that I am studying is on Revenue Recognition. Thank You.
Question 1
Seadrill Engineering licensed software to oil-drilling firms for 5 years. In addition to providing the software, the company also provides consulting services and support to ensure smooth operation of the software. The total transaction price is $350,000. Based on standalone values, the company estimates the consulting services and support have a value of $100,000 and the software license has a value of $250,000. Assuming the performance obligations are not interdependent, the journal entry to record the transaction includes
(a) a credit to Unearned Service Revenue of $100,000.
(b)a credit to Sales Revenue of $350,000.
(c)a credit to Sales Revenue for $250,000 and a credit to Unearned Service Revenue of $100,000.
(d) a credit to Service Revenue of $100,000.
Question 2
Roche Pharmaceuticals entered into a licensing agreement with Zenith Lab for a new drug under development. Roche will receive $6,750,000, if the new drug receives FDA approval. Based on prior approval, Roche determines that it is 85%likely that the drug will gain approval. The transaction price of this arrangement should be
(a) $0 until approval is received
(b)$6,750,000
(c) $1,012,500
(d) $5,737,500
Question 3
Meyer & Smith is a full-service technology company. They provide equipment, installation, 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 $120,000 on March 15, 2014. Estimated standalone fair values of the equipment, installation, and training are $75,000, 50,000, and $25,000 respectively. The transaction price allocated to equipment, installation and training is
(a) $120,000 for the entire bundle.
(b) $75,000, $50,000, $25,000 respectively.
(c)$60,0000, $40,000, and $20,000 respectively.
(d) $40,000, $40,000, $40,000 respectively.
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