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Allocating a Transaction Price and Recording Revenue and Cost of Revenue A retailer initiates an advertising campaign, which allows a customer to receive a coupon
Allocating a Transaction Price and Recording Revenue and Cost of Revenue A retailer initiates an advertising campaign, which allows a customer to receive a coupon for a free gaming system DVD with the purchase of three gaming system DVDs in a single purchase for $75 (3 x $25). To receive the free gaming system DVD coupon, the customer fills out a request form and mails it to the retailer prior to the expiration date. The retailer estimates, based on recent experience with similar promotions, that 80% of the customers will complete the mail-in rebate required to receive the free gaming system DVD. The cost of the DVD to the retailer is $18, and its standalone selling price is $25. a. How is the consideration allocated to the performance obligations in the revenue contract? Note: Round the allocated transaction prices to two decimal places. Transaction Standalone Alloca Performance Price Selling Transactic Obligations as stated Price (round DVD $ 0 $ 0 $ Coupon Offer 0 0 0 $ $ 0 $ b. Prepare the journal entry for sales and cost of sales for 40 sales transactions in which 3 gaming system DVDs were sold as part of each transaction. Round to the nearest dollar. Note: List multiple debits or credits (when applicable) in alphabetical order according to the first letter of the account name. Note: Round amounts to the nearest whole dollar. Account Name Dr. Cr. 0 - 0 0 To record sales. 0
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