Question

Baldi Plano manufactures customized planos for concert halls. On July 1, 2018, Baldi slgned a contract to deliver a concert plano for $150,000. Under the contract, Baldi is also obligated to provide a one-year maintenance service. If sold separately. the piano and the maintenance service would have cost $140,000 and $20,000, respectively. Required How much of the transaction price would be allocated to the plano and the maintenance service, assuming they are separate performance obligations? (Round the percentage values to 2 decimal places.) Transaction Price Piano Maintenance service

Answer 1

Solution :

Percentage of transaction price allocated to Piano = Stand alone price of Piano / Total standalone price

= $140,000 / $160,000 = 87.50%

Percentage of transaction price allocated to Maintenance Service = Stand alone price of Maintenance service / Total standalone price

= $20,000 / $160,000 = 12.50%

Transaction price - Piano = $150,000*87.50% = $131,250

Transaction price - Maintenance service = $150,000*12.50% = $18,750