Question

Gold Corp. sells office furniture. In 2020, it sold 200 desks for $500 each. For each desk sold, Gold Corp. distributed a 50% discount coupon for purchase of an office chair valid for two months. Based on historical experience, Gold Corp. expects that approximately 20% of the coupons will be utilized. The chairs purchased with the coupons are priced at $150 and normally discounted 10%. What would be the stand-alone sales price used by Gold Corp. for the coupon when allocating the $500 transaction price to the performance obligations

Answer 1

Gold Corp.

The stand-alone sales price is $135

Step-by-step explanation:

a) Data and Calculations:

Selling price of desks = $500 per unit

Selling price of chairs = $150 per unit

Combined price of desks and chairs = $650

50% discount coupon on chairs = $75 (50% * $150)

Normal discount price of chairs = $135 ($150 * 90%)

Combined price of desks and discounted chair = $575 ($500 + $75)

Allocation of transaction price:

Desk = $575 * $500/$635 = $452.76

Chair = $575 * $135/$635 = $122.24

Total = $575