Robi Inc. manufactures and services complex robotic equipment for other companie

Question

Robi Inc. manufactures and services complex robotic equipment for other companies. One of its most popular items is a robotic factory floor vacuum system which continuously moves around the floor removing small debris and oil. The system requires frequent maintenance. On 1/1/x4, Robi sold and delivered such a vacuum system to CTrip Inc., a bicycle manufacturing firm. Robi also agreed to include a 2-year maintenance contract in the sale. The maintenance contract starts 1/1/x4. The parties agreed to a contract price of $70,000. Robi sells this type of 2-year maintenance contract separately for $20,000. The stand alone price of the vacuum system is $60,000. What amount of revenue does Robi recognize for 20x4? a. 70,000 b. 61,250 c. 80,000 d. 64,250 e. 58,500
Robi Inc. manufactures and services complex robotic equipment for other companies. One of its most popular items is a robotic factory floor vacuum system which continuously moves around the floor removing small debris and oil. The system requires frequent maintenance. On 1/1/x4, Robi sold and delivered such a vacuum system to CTrip Inc., a bicycle manufacturing firm. Robi also agreed to include a 2-year maintenance contract in the sale. The maintenance contract starts 1/1/x4. The parties agreed to a contract price of $70,000. Robi sells this type of 2-year maintenance contract separately for $20,000. The stand alone price of the vacuum system is $60,000. What amount of revenue does Robi recognize for 20x4? a. 70,000 b. 61,250 c. 80,000 d. 64,250 e. 58,500
Robi Inc. manufactures and services complex robotic equipment for other companies. One of its most popular items is a robotic factory floor vacuum system which continuously moves around the floor removing small debris and oil. The system requires frequent maintenance. On 1/1/x4, Robi sold and delivered such a vacuum system to CTrip Inc., a bicycle manufacturing firm. Robi also agreed to include a 2-year maintenance contract in the sale. The maintenance contract starts 1/1/x4. The parties agreed to a contract price of $70,000. Robi sells this type of 2-year maintenance contract separately for $20,000. The stand alone price of the vacuum system is $60,000. What amount of revenue does Robi recognize for 20x4? a. 70,000 b. 61,250 c. 80,000 d. 64,250 e. 58,500

Explanation / Answer

Total standalone price = 20000+60000=80000

COntractprice allocated to vaccum system = 70000*60000/80000=52500

contract price allocated to maintenance contract = 70000*20000/80000= 17500

Contract revenue earned for maintenance contract during 2014 = 17500*1/2 = 8750   [for 2years]

Total revenue recognised= 57500+8750=61250

correct option is "b"

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