E6-31. Accounting for Contracts with Multiple Performance Obligations Amazon.com, Inc. provides the following description of its revenue recognition policies in its second quarter of 2018 10-Q report. Revenue Revenue is measured based on the amount of consideration that we expect to receive, reduced by estimates for return allowances, promotional discounts, and rebates. Revenue also excludes any amounts collected on behalf of third parties, including sales and indirect taxes. In arrangements where we have multiple per- formance obligations, the transaction price is allocated to each performance obligation using the relative stand-alone selling price. We generally determine stand-alone selling prices based on the prices charged to customers or using expected cost plus a margin. A description of our principal revenue generating activities is as follows: Retail salesWe offer consumer products through our online and physical stores. Revenue is recognized when control of the goods is transferred to the customer, which generally occurs upon our delivery to the carrier or the customer. Third-party seller services-We offer programs that enable sellers to sell their products on our websites and their own branded websites, and fulfill orders through us. We are not the seller of record in these transac- tions. The commissions and any related fulfillment and shipping fees we earn from these arrangements are recognized as the services are rendered. Subscription services-Our subscription sales include fees associated with Amazon Prime memberships and access to content including audiobooks, ebooks, digital video, digital music, and other non-AWS subscrip- tion services. Prime memberships provide our customers with access to an evolving suite of benefits that represent a single stand-ready obligation. Subscriptions are paid for at the time of or in advance of delivering the services. Revenue from such arrangements is recognized over the subscription period. AWS-Our AWS sales arrangements include global sales of compute, storage, database, and other service offerings. Revenue is allocated to the services provided based on stand-alone selling prices and is recog- nized as the services are rendered. Sales commissions we pay in connection with contracts that exceed one year are capitalized and amortized over the contract term. Other Other revenue primarily includes sales of advertising services and is recognized as the services are rendered a. What is an arrangement with multiple performance obligations? How are revenues recog- nized in such arrangements? b. Suppose that Amazon.com sells a Fire Tablet with a one-year membership in Amazon Prime. Assume that the device has a stand-alone selling price of $110, and a one-year Prime member- ship costs $120. Suppose the price charged for the combination is $200, and a customer buys E6-31. Accounting for Contracts with Multiple Performance Obligations Amazon.com, Inc. provides the following description of its revenue recognition policies in its second quarter of 2018 10-Q report. Revenue Revenue is measured based on the amount of consideration that we expect to receive, reduced by estimates for return allowances, promotional discounts, and rebates. Revenue also excludes any amounts collected on behalf of third parties, including sales and indirect taxes. In arrangements where we have multiple per- formance obligations, the transaction price is allocated to each performance obligation using the relative stand-alone selling price. We generally determine stand-alone selling prices based on the prices charged to customers or using expected cost plus a margin. A description of our principal revenue generating activities is as follows: Retail salesWe offer consumer products through our online and physical stores. Revenue is recognized when control of the goods is transferred to the customer, which generally occurs upon our delivery to the carrier or the customer. Third-party seller services-We offer programs that enable sellers to sell their products on our websites and their own branded websites, and fulfill orders through us. We are not the seller of record in these transac- tions. The commissions and any related fulfillment and shipping fees we earn from these arrangements are recognized as the services are rendered. Subscription services-Our subscription sales include fees associated with Amazon Prime memberships and access to content including audiobooks, ebooks, digital video, digital music, and other non-AWS subscrip- tion services. Prime memberships provide our customers with access to an evolving suite of benefits that represent a single stand-ready obligation. Subscriptions are paid for at the time of or in advance of delivering the services. Revenue from such arrangements is recognized over the subscription period. AWS-Our AWS sales arrangements include global sales of compute, storage, database, and other service offerings. Revenue is allocated to the services provided based on stand-alone selling prices and is recog- nized as the services are rendered. Sales commissions we pay in connection with contracts that exceed one year are capitalized and amortized over the contract term. Other Other revenue primarily includes sales of advertising services and is recognized as the services are rendered a. What is an arrangement with multiple performance obligations? How are revenues recog- nized in such arrangements? b. Suppose that Amazon.com sells a Fire Tablet with a one-year membership in Amazon Prime. Assume that the device has a stand-alone selling price of $110, and a one-year Prime member- ship costs $120. Suppose the price charged for the combination is $200, and a customer buys