Background:

Day one: a college student walks into the Coffee House on campus and orders a large cup of black coffee. The cashier takes the order and says it will cost $$5.$ The student hands the cashier $$5.$ The barista then pours the coffee into a large cup and hands it to the student. The student then hustles off to accounting class.

Requirements:

Review the summary of the five$-$step, revenue recognition model in ASC $606-10-05-04.$ Also review ASC $606-10-25-1$ and ASC $606-10-25-30.$

For each of the five steps: $-$ Describe how the revenue model applies to this transaction. For any step that is not applicable, simply indicate it is not applicable.

Draw a conclusion as to whether the requirements for that step were complied with.

As a final conclusion, determine the amount of revenue that should be recognized and provide the journal entry to record the transaction.

Part II:

Part I should be completed before beginning Part II$.$

Background:

Day two: the same student goes into the Coffee House and orders a large coffee in a campus$-$branded, thermal coffee mug as part of a "welcome back to school" daily special. As the student is focused on sustainability, the student plans to use this mug daily for refills rather than using paper cups. The barista pours the coffee into the mug and delivers it to the student. The cashier then collects $$7$ from the student. Standalone selling prices are $$5$ for the coffee and $$3$ for the mug, so the student got a bargain on the combined purchase. The student takes the coffee in the new mug and enjoys it while reading The Wall Street Journal.

Requirements:

Review ASC $606-10-25-19$ through $22$ and ASC $606-10-32-31$ through $32.$

For each of the five steps:

Describe how the revenue model applies to this transaction. For any step that is not applicable, simply indicate it is not applicable.

Draw a conclusion as to whether the requirements for that step were complied with.

As a final conclusion, determine the amount of revenue that should be recognized with detailed calculations and provide the journal entry to record the transaction.

Part III:

Part II should be completed before the beginning of Part III.