Superior Cars sold a car for $35,000. In addition, the company will provide 4 oil changes per year for 5 years and an extended warranty for 5 years. The normal selling prices are as follows:
a. Determine how revenue should be allocated to the various components in this transaction.
b. Apply the appropriate revenue recognition criteria to determine when revenue should be recognized to the components in this transaction.

Question

Superior Cars sold a car for $35,000. In addition, the company will provide 4 oil changes per year for 5 years and an extended warranty for 5 years. The normal selling prices are as follows:
  a. Determine how revenue should be allocated to the various components in this transaction.
b. Apply the appropriate revenue recognition criteria to determine when revenue should be recognized to the components in this transaction.

Quizplus · Accepted Answer

The Answer of Superior Cars sold a car for $35,000. In addition, the company will provide 4 oil changes per year for 5 years and an extended warranty for 5 years. The normal selling prices are as follows:
  a. Determine how revenue should be allocated to the various components in this transaction.
b. Apply the appropriate revenue recognition criteria to determine when revenue should be recognized to the components in this transaction.

Superior Cars Sold a Car for $35,000