Question

BigBoy Equipment Inc. sells heavy- duty forklit trucks. Model 217A has a stand- alone price of $ 140,000. BigBoy offers to sell the 217A inclusive of a three- year service contract for $ 180,000.

Required:
Prepare a journal entry to record the sale of one Model 217A forklit truck plus service con-tract for $ 180,000 assuming:
1. A comparable service contract is sold separately for $ 60,000. BigBoy uses the relative fair value method for multiple deliverables.
2. The service contract has a variable stand- alone value ranging from $ 30,000 to $ 70,000 and BigBoy uses the residual method.



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  • CreatedFebruary 17, 2015
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