On December 12, 2014, Customer purchased two pieces of equipment for $105. Selle

Question

On December 12, 2014, Customer purchased two pieces of equipment for $105. Seller delivered Item A on December 13 but doesn’t expect to deliver Item B until the following February. Seller doesn’t sell either items separately (only as a pair), but Seller estimates the individual selling prices to be $40 for item A and $80 for item B. Assuming this contract meets the criteria for separation as a multiple-element arrangement, how much revenue can Seller recognize in the fiscal year ending December 31, 2014?

Explanation / Answer

seller will recognize revenue for item A as same is delievered to customer and risk and reward associated with ownership of item A is transfered.

Revenue for item A = 105 *40 / (40+80) = 105*40/ 120

                          = $ 35 to be recognised in 2014

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