From the first quarter 2018 I 0-Q of Groupon, Inc.: Groupon operates online local commerce marketplaces throughout the world that connect merchants to consumers by offering goods and services, generally at a discount. Consumers access those marketplaces through our websites, primarily localized groupon.com sites in many countries, and our mobile applications.

Traditionally, local merchants have tried to reach consumers and generate sales through a variety of methods, including online advertising, paid telephone directories, direct mail, newspaper, radio, television and other promotions. By bringing the brick and mortar world of local commerce onto the Internet, Groupon is helping local merchants to attract customers and sell goods and services. We provide consumers with savings and help them discover what to do, eat, see, buy and where to travel. The same filing provides the following information about the company's revenue recognition policies.

10. REVENUE RECOGNITION

Product and service revenue are generated from sales transactions through the Company's online marketplaces in three primary categories: Local, Goods and Travel. Product revenue is earned from direct sales of merchandise inventory to customers and includes any related shipping fees. Service revenue primarily represents the net commissions earned by the Company from selling goods and services provided by third-party merchants. Those marketplace transactions generally involve the online delivery of a voucher that can be redeemed by the purchaser with the third-party merchant for goods or services (or for discounts on goods or services). To a lesser extent, service revenue also includes commissions earned when customers make purchases with retailers using digital coupons accessed through the Company's websites and mobile applications. 

Additionally, in the United States the Company has recently been developing and testing voucher less offerings that are linked to customer credit cards. Customers claim those voucher less merchant offerings through the Company's online marketplaces and earn cash back on their credit card statements when they transact with the related merchants, who pay the Company commissions for such transactions. In connection with most of our product and service revenue transactions, we collect cash from credit card payment processors shortly after a sale occurs. For transactions in which the Company earns commissions when customers make purchases with retailers using digital coupons accessed through its websites and mobile applications, the Company generally collects payment from affiliate networks on terms ranging from 30 to 150 days. For merchant agreements with redemption payment terms, the merchant is not paid its share of the sale price for a voucher sold through one of the Company's online marketplaces until the customer redeems the related voucher. If the customer does not redeem a voucher with such merchant payment terms, the Company retains all of the gross billings for that voucher, rather than retaining only its net commission. The Company estimates the variable consideration from vouchers that will not ultimately be redeemed and recognizes that amount as revenue at the time of sale, rather than when the Company's legal obligation expires. The Company estimates variable consideration from unredeemed vouchers using its historical voucher redemption experience.

REQUIRED

a. Assume that Groupon sells an Invicta Chronograph Watch in its Product marketplace. The price of the watch is $80, and the watch cost Groupon $40. Using journal entries, illustrate how Groupon would record the sale of the watch.

b. Assume that Groupon sells a restaurant voucher in its Local marketplace. The consumer pays $80, and Groupon will pay the restaurant $40 after the consumer has redeemed the voucher at the restaurant. The consumer has 60 days to redeem the voucher. Using journal entries, illustrate how Groupon would record the sale of the voucher. Assume that the consumer will redeem the voucher with certainty.

c. Refer to the facts presented in part b above. Assume that Groupon estimates that 10% of the Groupon customers will not redeem the voucher within the 60-day period. How does this change the entry in part b?