silver inc. sells to a customer a perpetual software license and post-contract customer support for a 12-month period, commencing at the time that the software is activated. silver inc. charges $780 upfront when the software is purchased and $52 a month for 12 months, due at the end of the month. silver inc. sells the software separately for $1,040 while the standalone selling price of the post-contract customer support is $520. required: how should the transaction price be allocated among the performance obligation(s)? round each of your answers to the nearest dollar. show your computation.

The compensation for which an entity anticipates being entitled, minus sums collected on behalf of other parties, in exchange for transferring promised products or services to a client is known as the transaction price.

Given:

Standalone selling price of software = $1404

Standalone selling price of post-contract customer support = $520(Given)

Total Standalone selling price = $1560

The formula of allocation of transaction price = Total transaction price × Standalone selling price of product/ Total standalone selling price

transaction price allocation to respective performance obligation using the above formula-

transaction price allocation of software = Total transaction price × Standalone selling price of software / Total standalone selling price

= $1404 × $1040/ $1560 = $936

transaction price allocation for post-contract customer support= Total transaction price × Standalone selling price of post-contract customer support /Total standalone selling price

= $1404 × $520/ $1560 = $468

Thus transaction price should be allocated among performance obligation =

Software = $936 and post-contract customer support = $468

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