Question
Jasper Inc, a software company has started selling accounting software and user support bundled together. The fair value of the software is $750 and the
Jasper Inc, a software company has started selling accounting software and user support bundled together. The fair value of the software is $750 and the fair value of the user support is $250. The user support is valid for a period of 12 months from the date of software purchase. To be able to compete with a competitors offering, Jasper Inc. decided to sell the bundle at a discount for $900. During the first month that this discounted offer was available, 100 units of this software bundle were sold at the discounted price. Assume sales were incurred evenly throughout the months.
(a). For each bundled sale made, how much of the sales price should be allocated to the software for purpose of revenue recognition?
(b). Calculate total revenue (i.e., for all 100 bundled units sold) to be reported for the first month. You can assume one months user support has been performed.
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