BU387 Study Guide - Final Guide: Gross Profit, Google, Current Asset
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Example: google inc. sells a product and a service bundled together. Assume that the separate deliverables meet the gaap criteria for treatment as separate units. The fair value of the product is and the fair value of the service is . In order to make the sale, google sold the bundle at a discount for . Under the fair value method, the amount that is allocated to the product would be . 88 and the value attributed to the service would be . 67. If the residual value method is used, the service would be valued at and the product at . Two approaches: earnings approach: revenue recognized when performance is achieved and collectability is reasonably assured, contract approach: revenue recognized when control passes to the buyer or services are performed. Percentage of completion steps: percent complete = ______costs incurred to date_____ Construction-in-process: costs incurred + gross profit recognized to date.
