Sullivan Software Sells Packages of a Software Program and One

question 96

Multiple Choice

Sullivan Software sells packages of a software program and one year's worth of technical support for $500. Its packaging lists the $500 sales price as comprised of a software program at a price of $450 and technical support with a price of $100, with a $50 discount for the package deal. All of Sullivan's sales are for cash, and there are no returns. Sullivan sells the software program separately for $475 and offers a year of technical support separately for $75.
-Sullivan should recognize revenue for the two parts of the arrangement as follows:

• A) Recognize the entire $500 when the customer pays cash to buy the package.
• B) Recognize the portion of the $500 attributable to the software program when the customer pays cash to buy the package; defer the portion attributable to technical support and recognize over the support period.
• C) Defer the entire $500 and recognize over the support period.
• D) Recognize the entire $500 upon conclusion of the support period.

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Definitions:

Reactivity

The degree to which a substance undergoes a chemical reaction, either by itself or with other materials, under certain conditions.

Respiratory Mucus

A protective secretion from the airways that traps particles and pathogens, aiding in their removal from the respiratory system.

Ciliary Muscles

Small muscles located in the eye that adjust the lens shape to focus on objects at various distances.

Blink Reflex

An involuntary blinking of the eyelids elicited by stimulation of the cornea or by other stimuli that protects the eye from foreign bodies and bright light.