Case: Many online retailers often act as intermediaries between the manufacturer and the customer without ever taking possession of the merchandise sold. Revenue recognition for this type of transaction has been controversial. Assume that Amazon sold you a product for $200 that cost $150. The companys profit on this transaction clearly is $50. Should Amazon recognize $200 in revenue and $150 in cost of goods sold (the gross method), or should it recognize only the $50 in gross profit (the net method) as commission revenue?

Please search under the Codification Topic 606 - Revenue Recognition

1. Access Codification and determine the specific citation that lists the indicators that suggest an entity is a principal. Be sure to cite the reference location and the specific titles using the format noted in the previous page, pertaining to this reference location within the Codification (1 point).

2. What indicators does the Codification list that suggest an entity is a principal? You can directly use the indicators provided in the Codification for this purpose (1 point).

3. Using EDGAR (www.sec.gov), access Alphabet, Inc.s 201710-K. Locate the disclosure note that discusses the companysrevenue recognition policy with respect to ads placed on Google Network Members properties. Then identify which method (net or gross) Alphabet used (1 point) and cite theirreason for choosing one method over the other from their 2017 10-K (1 point).

Tips on how to access 10-Ks: go to www.sec.gov and click on Filings on the upper right corner. Then click on Company Filings Search and click on Company or Person Lookup. Enter the company name Alphabet Inc. Find the 2017 10-K with the filing date of 2018-02-06. The disclosure notes regarding the financial statements start right after the presentation of the financial statements.

4. Discuss whether you agree with Alphabets reasoning in your answer to question 3 and explain why. (1 point)