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 $58,800 and the standalone selling price for the annual maintenance contract is $1,200. During October, Value Dealership Inc. sold 60 vehicles for $59,000 per vehicle, each with a free annual maintenance contract.

a. Determine how the transaction price should be allocated among the performance obligation(s) and record the journal entry in October for Value Dealerships sale of 60 vehicles with the associated maintenance contracts to customers. Ignore the cost entry.

b. Assume the same information above except that the standalone selling price of the vehicle is $58,200 and 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 $1,800. Determine how the transaction price should be allocated among the performance obligation(s) and record the journal entry in October for Value Dealerships sale of 60 vehicles to its customers. Ignore the cost entry.

c. Assume the same information (original scenario) above except that the standalone selling price of the vehicle is 58,500 and 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 $1,000 for the year and the expected profit margin on the service contract is 50%. Determine how the transaction price should be allocated among the performance obligation(s) and record the journal entry in October for Value Dealerships sale of 60 vehicles to its customers. Ignore the cost entry.