Complete Question is:
On November 1, 2019, Gerakos Corporation sold software and asix-month technical support contract to a customer for $80,000.Gerakos sells the same software without technical support for$60,000. It sells technical support for $30,000. Gerakos allocatesthe transaction price based on relative stand-alone values.
Required:
What amount of revenue does Gerakos recognize in 2019 and in2020?
Answer:
Here the amount of software and technical support is bifurcated based on their individual prices
Software = 80000*60000/90000 = 53,333
Technical support = 80000*30000/90000= 26667
The pending technical support is for four months 26,667*4/6 = 17778
The revenue to be recognized in 2020 is 17778
The revenue to be recognized in 2019 is 80000-17778= 62222
Explanation:
