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Problem - Allocation of Transaction Price - Rix Company sells home appliances and provides installation and service for its customers. On April 1, 2019, a customer purchased a dishwasher that Rix normally sells for $1,000. In addition, the customer purchased the installation service and a 3-year service contract, with stand-alone selling prices of $200 and $400, respectively. Because the customer purchased all three items as a bundle, Rix charged the customer $1,400.
Required -
How should the transaction price be allocated among the products?
Prepare the journal entries to recognize revenue related to each product in 2019.
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