Sanchez Co. enters into a contract to sell Product A and Product B on January 2, 2014, for an upfront cash payment of $165,000. Product A will be delivered in 2 years (January 2, 2016) and Product B will be delivered in 5 years (January 2, 2019). Sanchez Co. allocates the $165,000 to Products A and B on a relative standalone selling price basis as follows.

		Standalone Selling Prices					Percent Allocated		Allocated Amounts
Product A			$	44,000			25%			$	41,250
Product B				132,000			75%				123,750
			$	176,000						$	165,000

Sanchez Co. uses an interest rate of 6%, which is its incremental borrowing rate. (Hint: Given the (discounted) upfront payment, accretion of the contract liability will need to be recorded.)