TopTel Co provides a bundled-service package to J. Willis for $2000 upfront. The service package includes upfront advice, ‘on-call’ advice, and database access for a 1-year period. If each service was sold separately to J. Willis the fees would be:Up-front advice: $400On-call advice : $1800Database access: $600 Required:What is the amount of revenue recognised in relation to the database access is (rounded to the nearest whole dollar)?Group of answer choices$429indeterminable based on the facts provided$1286$286
Question
TopTel Co provides a bundled-service package to J. Willis for 400On-call advice : 600 Required:What is the amount of revenue recognised in relation to the database access is (rounded to the nearest whole dollar)?Group of answer choices1286$286
Solution
To answer this question, we need to apply the concept of standalone selling price proportionate allocation under AASB 15.
Step 1: Calculate the total standalone selling price The total standalone selling price is the sum of the individual prices of each service if sold separately. In this case, it would be 1800 (on-call advice) + 2800.
Step 2: Calculate the proportionate allocation for each service The proportionate allocation for each service is calculated by dividing the standalone selling price of each service by the total standalone selling price.
For database access, the proportionate allocation would be 2800 = 0.2143 (rounded to four decimal places).
Step 3: Calculate the revenue recognized for each service The revenue recognized for each service is calculated by multiplying the proportionate allocation for each service by the total contract price.
For database access, the revenue recognized would be 0.2143 * 428.6.
Rounded to the nearest whole dollar, the revenue recognized for database access would be $429.
So, the answer is $429.
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