Question

After the launch of uPhone 8, Pear Inc. decides to provide some incentives to promote the sale of uPhone 7 inventories.

Pear started a deal as follows: The customer pays $900, which is the market price for a stand-alone uPhone 7 and gets free uTunes download for three months. The market price for one-month uTunes download is $75.

The deal was a success. Pear sold 1,000 uPhone 7 bundles on December 1^st, 2019.

Required: Determine the amount of revenue that Pear Inc. should record on December 1^st and December 31^st, 2019 respectively, from this bundle sale. Show steps for partial marks

Answer 1

.

As per IFRS 15, the Co made sales of two things:

· Sale of U Phone 7

· Sale of U Tunes (for free)

A portion of the Sale of U Tune needs to be allocated to the U phone based on the relative standalone selling price.

Particulars	Calculations	Selling Price	Revenue
U Phone	(1000*900)	900,000 {a}	720,000 {[a*a]/c}
U Tune	(1000*3*75)	225,000 {b}	180,000 {[a*b]/c}
Total	1125000 {c}	900,000

So total revenue to e be recognized $900,000/-