If an option to purchase an extended warranty at a special discount is included with a product when the product is purchased, a portion of the contract price needs to be allocated to the option.

Question

Quizplus · Accepted Answer

When an option to purchase an extended warranty is included at a special discount, it is typically considered a separate performance obligation from the product being sold. Therefore, a portion of the contract price should be allocated to the option. This is in accordance with accounting standards such as ASC 606.

If an Option to Purchase an Extended Warranty at a Special