Star Ltd manufactures and sells a motorbike. It is sold with a two-year manufacturer’s warranty. It also offers customers the option to purchase an extended warranty on its product. Under the extended warranty, Star will repair products that become defective within three years from the date the manufacturer’s warranty ends. If at the time of purchasing a scooter, a customer does not purchase an extended warranty, the customer can purchase an extended warranty separately at a later stage. The combined sales price for a motorbike plus an extended warranty is £19,300. Separately, a scooter can be purchased for £18,000 and the extended warranty can be purchased for £2,000. 

For the year ending 31 Dec 2020, Start Ltd has sold 5,300 units of motorbikes. 

Required: 

1. Explain how this transaction should be accounted for in financial statements for the year ending 31 Dec 2020. 

2. Supreme Solutions Ltd (SS) is a software company and in on 1st of July 2020 it sold its software product to Delta Ltd for a total of £400,000 which includes the provision of support service for the next 4 years.

Answer rating: 100% (QA)

21 In the Given Transaction price is pound 19300 this will be allocated to each performance obligati... View the full answer