Dexter purchases equipment from Ray Company for a normal market price of $5,000,000. As an incentive,...
Dexter purchases equipment from Ray Company for a normal market price of $5,000,000. As an incentive, Ray's salesman throws in free installation as part of the deal. The price of the installation service is estimated to have a fair value of $600,000. Assuming the transaction to be multiple-deliverable arrangement, compute the amount to be allocated to installation. Round your percentage calculations to AT LEAST 4 decimal places.
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$535,714 |
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$600,000 |
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$670,200 |
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$614,570 |
Homework Answers
Total cost
Total cost = Normal market price + Installation fair value
= $5,000,000 + $600,000
= $5,600,000
Discount rate
Discount rate = [Installation fair value / Total cost] x 100
= [$600,000 / $5,600,000] x 100
= 10.714286%
The amount to be allocated to installation
Therefore, the amount to be allocated to installation = Normal market price x Discount rate
= $5,000,000 x 10.714286%
= $535,714
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Dexter purchases equipment from Ray Company for a normal market
price of $5,000,000. As an incentive,...
Dexter purchases equipment from Ray Company for a normal market price of $5,000,000. As an incentive,...
Dexter purchases equipment from Ray Company for a normal market price of $5,000,000. As an incentive, Ray's salesman throws in free installation as part of the deal. The price of the installation service is estimated to have a fair value of $600,000. Assuming the transaction to be multiple-deliverable arrangement, compute the amount to be allocated to installation. Round your percentage calculations to AT LEAST 4 decimal places. A) 535,714 B) 600,000 C) 670,200 D) 614,570 Please show work. When must...
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