Meyer & Smith is a full-service technology company. They provide equipment, inst
ID: 2575702 • Letter: M
Question
Meyer & Smith is a full-service technology company. They provide equipment, installation services as well as training. Customers can purchase any product or service separately or as a bundled package. Sunland Corporation purchased computer equipment, installation and training for a total cost of $181440 on March 15, 2018. Estimated standalone fair values of the equipment, installation, and training are $99000, $67200, and $35400 respectively. The transaction price allocated to equipment, installation and training is$60480, $60480, $60480 respectively. $181440 for the entire bundle. $99000, $67200, $35400 respectively. $89100, $60480, $31860 respectively.
Explanation / Answer
D.$89,100 $60,480, $31,860 respectively.
Total of fair values = $99000 + 67200 + 35400 =>$201,600.
transaction price alloated = (stand alone fair value) / (total fair value) * purchase price.
transaction price allocated to equipment = ($99,000) / $201,600 * $181440 =>$89,100...(rounded off).
price allocated to installation = ($67,200 / 201,600)*181,440 =>$60,480.
price alocated to training are = ($35,400 / 201,600)*$181,440 =>$31,860.