Fancy Cars Sold a Used Car for $35,000 Cash$$\begin{array} { | l | l | }
\hline \text { Gar } & \$ 30,000 \
\hline \text { Bil change } & \$ 50 \text { each oil change } \
\hline
\end{array}$$

Question

Fancy Cars Sold a Used Car for $35,000 Cash$$\begin{array} { | l | l | } 
\hline \text { Gar } & \$ 30,000 \
\hline \text { Bil change } & \$ 50 \text { each oil change } \
\hline
\end{array}$$

Examlex · Accepted Answer

The Answer is a. The residual method is appropriate since the fair value of the warranty is not determinable as a stand-alone price has not yet been established for the service-type warranty.

a. The residual method is appropriate since the fair value of the warranty is not determinable as a stand-alone price has not yet been established for the service-type warranty. b. Revenue for the car should be recognized upon delivery. Revenue for the oil changes will recorded as each of the 20 oil changes is performed (1,000/ (4/yr × 5 yrs)). The revenue for the warranty would be recognized over the 5 years.

b. Revenue for the car should be recognized upon delivery. Revenue for the oil changes will recorded as each of the 20 oil changes is performed (1,000/ (4/yr × 5 yrs)). The revenue for the warranty would be recognized over the 5 years.

Fancy Cars Sold a Used Car for $35,000 Cash $\begin{array} { | l | l | } \hline \text { Gar } & \$ 30,000 \\\hline \text { Bil change } & \$ 50 \text { each oil change } \\\hline\end{array}$

Definitions:

Fancy Cars Sold a Used Car for $35,000 Cash Gar $30,000 Bil change $50 each oil change \begin{array} { | l | l | } \hline \text { Gar } & \$ 30,000 \\\hline \text { Bil change } & \$ 50 \text { each oil change } \\\hline\end{array} Gar Bil change ​$30,000$50 each oil change ​​

Definitions:

Fancy Cars Sold a Used Car for $35,000 Cash $\begin{array} { | l | l | } \hline \text { Gar } & \$ 30,000 \\\hline \text { Bil change } & \$ 50 \text { each oil change } \\\hline\end{array}$