Hedley Corporation sold hardware and software for $70,000 cash. In addition, the company will provide support on the software for 1 year and maintenance on the hardware for 3 years. The observable stand-alone selling prices are as follows:
$$\begin{array} { | l | l | }
\hline \text { Hardware } & \$ 60,000 \
\hline \text { Software } & \$ 15,000 \
\hline \text { Hardware Maintenance } & \$ 5,000 \
\hline
\end{array}$$ 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 for the various components of this transaction.

Question

Hedley Corporation sold hardware and software for $70,000 cash. In addition, the company will provide support on the software for 1 year and maintenance on the hardware for 3 years. The observable stand-alone selling prices are as follows:
 $$\begin{array} { | l | l | } 
\hline \text { Hardware } & \$ 60,000 \
\hline \text { Software } & \$ 15,000 \
\hline \text { Hardware Maintenance } & \$ 5,000 \
\hline
\end{array}$$ 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 for the various components of this transaction.

Quizplus · Accepted Answer

The Answer of Hedley Corporation sold hardware and software for $70,000 cash. In addition, the company will provide support on the software for 1 year and maintenance on the hardware for 3 years. The observable stand-alone selling prices are as follows:
 $$\begin{array} { | l | l | } 
\hline \text { Hardware } & \$ 60,000 \
\hline \text { Software } & \$ 15,000 \
\hline \text { Hardware Maintenance } & \$ 5,000 \
\hline
\end{array}$$ 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 for the various components of this transaction.

Hedley Corporation Sold Hardware and Software for $70,000 Cash A Determine How Revenue Should Be Allocated to the Various