Mauer Company licenses customer-relationship software to Hedges Inc. for 3 years. In addition to providing the software, Mauer promises to provide consulting services over the life of the license to maintain operability within Hedges’ computer system. The total transaction price is $200,000. Based on standalone values, Mauer estimates the consulting services have a value of $75,000 and the software license has a value of $125,000. Upon installation of the software on July 1, 2014, Hedges pays $100,000; the contract balance is due on December 31, 2014. Identify the performance obligations and the revenue in 2014, assuming (a) the performance obligations are interdependent and (b) the performance obligations are not interdependent.
SHOW ALL STEPS:
(a) If interdependent, the contract is accounted for as a single revenue amount of $
(b) If not interdependent, service revenue is $
and the license revenue is $