ExpertMedium2 marksMultiple Choice
ACCA · Question 16 · Financial Reporting
Section B - Case 1: QuantumQ
QuantumQ provides quantum computing hardware and specialized cooling services. On 1 January 20X6, QuantumQ entered into a contract with a research lab to supply a quantum processor and 2 years of continuous cooling maintenance for a total fixed fee of $800,000. The processor and maintenance are distinct. The standalone selling price of the processor is $600,000 and the 2-year maintenance is $400,000. The processor was delivered and installed on 1 January 20X6.
What amount of the transaction price should be allocated to the quantum processor?
Section B - Case 1: QuantumQ
QuantumQ provides quantum computing hardware and specialized cooling services. On 1 January 20X6, QuantumQ entered into a contract with a research lab to supply a quantum processor and 2 years of continuous cooling maintenance for a total fixed fee of $800,000. The processor and maintenance are distinct. The standalone selling price of the processor is $600,000 and the 2-year maintenance is $400,000. The processor was delivered and installed on 1 January 20X6.
What amount of the transaction price should be allocated to the quantum processor?
Answer options:
A.
$600,000
B.
$480,000
C.
$400,000
D.
$320,000
How to approach this question
Calculate the total of the standalone selling prices. Find the proportion of the processor's standalone price to the total. Apply this proportion to the total transaction price.
Full Answer
B.$480,000✓ Correct
Total standalone selling prices = $600,000 + $400,000 = $1,000,000.
The processor represents 60% ($600k / $1,000k) of the total standalone value.
Allocated transaction price = 60% × $800,000 = $480,000.
Common mistakes
Recognizing the full standalone price of $600,000 and allocating the remaining $200,000 to maintenance.
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