For each of the following independent scenarios, determine the amount of revenue recognized in 2015 1. On 12/24/15, Samsung sold a new Ultra HD TV to an online customer for $2,750, which is comprised of the TV's $2,500 retail price plus $250 for an extended warranty plan. The extended warranty plan covers against any defects for a period of two years (starting after the expiration of the TV's standard 1-year warranty). The customer took delivery of the TV on 12/31/15 but had paid for it on 12/24/15 On 10/1/15, PowerGym sold a membership package to a customer. The package includes a 1-year membership (starting 10/1/15) as well as 3 sessions with a personal trainer Normally, a gym membership is sold for $115 / month and a non-refundable $72 activation fee is also charged at the inception of each new membership. Also, the typical price for a single personal trainer session is $66. However, PowerGym was offering a discounted package price of S1,500, which includes the 1-year membership, the activation fee and 3 trainer sessions (usable at any time over the 1-year membership). Thus, the customer paid $1,500 on 10/1/15 to purchase the discounted package. By the end of 2015, the customer had used 1 of the 3 personal trainer sessions. Historically, PowerGym's customers have utilized all personal trainer sessions sold via such a discounted package On 7/15/15, Ortiz Co. signed a contract to provide EverFresh Inc. with an ingredient weighing system for a price of $90,000. The system included finely-tuned scales modified to fit into EverFresh's assembly line, Ortiz's proprietary software customized to integrate the new scales with the existing assembly line software, and a one-year contract to calibrate the equipment and software on an as-needed basis. (Ortiz competes with other vendors who offer ongoing calibration contracts for Ortiz's systems.) If Ortiz was to provide these goods and services separately, it would charge $60,000 for the scales, $10,000 for the software, and S30,000 for the calibration contract. Ortiz delivered and installed the equipment and software on 10/1/15, and the calibration service commenced on that date On June 1, 2015, ACP Corp. entered into a 1-year agreement to provide payroll processing services for Emmet Property Management. The agreement started that day. Under the terms of the agreement, ACP is paid a fixed fee of $90,000, payable in three S30,000 installments on 6/1/15, 11/1/15 and 5/31/16. In addition, the agreement specifies that ACP will be paid an additional $24,000 on 5/31/16 if Emmet's workforce averages more than 120 employees over the 1-year term. ACP estimates that there is a 60% chance that the 120-employee average threshold will be exceeded (and a 40% chance it wont). As of 12/31/15, Emmet has paid all required amounts on time. Assume ACP estimates variable consideration using the expected value Rework #4 assuming that ACP estimates variable consideration using the most likely amount 2. 3. 4. 5
