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Calculate the net income applicable to gigabit first month

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Gigabit Inc., a software company sells new accounting software and user support bundled together. The fair value of the software is $1,500 and the fair value of the user support is $500. The user support is valid for a period of 12 months from the date of software purchase. To be able to compete with a competitor's offering, Gigabit decided to sell the bundle at a discount for $1,800.

  • During its first month of sales, 100 units of this software bundle were sold at the discounted price, and expenses were $50,000.

Problem 1: Calculate the sale price that should be allocated to each component of the bundle using the adjusted market assessment approach.

Problem 2: Calculate the sale price that should be allocated to each component of the bundle using the residual approach.

Problem 3: Assuming that the relative fair value method is used and the income tax rate is 30%, calculate the net income applicable to Gigabit's first month of sales.

Reference no: EM132778586

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