Falcon Ltd is a software company and in on 1st of Oct 2020 it sold its software product to Mira Ltd for a total of £600,000 which includes the provision of support service for the next 3 years. Without a support service, a software is sold to other customers at £460,000. Support service can be provided separately at £80,000 per year. Required: Explain how this transaction should be accounted for in financial statements for year ending 31 Dec 2020. Note: Ignore any discounting.

Falcon Ltd is a software company and in on 1st of Oct 2020 it sold its software product to Mira Ltd for a total of £600,000 which includes the provision of support service for the next 3 years. Without a support service, a software is sold to other customers at £460,000. Support service can be provided separately at £80,000 per year. Required: Explain how this transaction should be accounted for in financial statements for year ending 31 Dec 2020. Note: Ignore any discounting.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter4: The Balance Sheet And The Statement Of Shareholders' Equity

Section: Chapter Questions

Problem 2C: It is the end of 2019 and you are an accountant for Stone Company. During 2019, sales of the...

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