Reference no: EM132691060

Thompson Scientific Equipment has been a Canadian leader in the sales of scientific equipment for the last decade. A mass spectrometer used research has a stand-alone price of $630,000. Currently, Thompson is selling this particular mass spec with a three-year service contract for $680,000. Herbert typically bills its customers for the entire contract cost at the point of sale.

Required:

Problem a: Make a journal entry to record the sale of one mass spectrometer including the service contract for $680,000 assuming:

1. A comparable service contract is sold separately for $90,000. Thompson Scientific uses the relative stand-alone value method for multiple deliverables.

2. The service contract has a variable stand-alone value ranging from $45,000 to $75,000 and Thompson Scientific uses the residual value method.