Reference no: EM132796134
Problem - Allocation of Transaction Price - Appliance Centre is an experienced home appli- ance dealer. Appliance Centre also offers a number of services together with the home appliances that it sells. Assume that Appliance Centre sells ovens on a stand-alone basis. Appliance Centre also sells installation services and maintenance services for ovens. However, Appliance Centre does not offer installation or maintenance services to customers who buy ovens from other vendors. Pricing for ovens is as follows.
Oven only $800
Oven with installation service 850
Oven with maintenance services 975
Oven with installation and maintenance services 1,000
In each instance in which maintenance services are provided, service is separately priced within the arrangement at $175. Additionally, the incremental amount charged by Appliance Centre for installation approximates the amount charged by independent third parties.
Required -
a. Assume that a customer purchases an oven with both installation and maintenance services for $1,000. Based on its experience, Appliance Centre believes that it is probable that the installation of the equipment will be performed satisfactorily to the consumer. Assume that the maintenance services are priced separately. Identify the separate performance obligations related to the Appliance Centre revenue arrangement.
b. Allocate the transaction price of $1,000 among the performance obligations of the contract. Round percentage allocations to two decimal places and final amounts to the nearest dollar. Assume IFRS is followed.
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