ACCA FR · Chapter 5 · Question 2 of 11
Rook Co sells a machine together with two years of servicing for a single price of $1,000. Sold separately, the machine would be priced at $900 and the servicing at $300. How much of the transaction price should be allocated to the machine?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) $750
Explanation
IFRS 15 allocates the transaction price to performance obligations in proportion to their stand-alone selling prices. Total stand-alone prices = $900 + $300 = $1,200. Machine = $1,000 x 900/1200 = $750, recognised on delivery. Servicing = $250, recognised over the two years.
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