Hi,

Here is the problem, thank you in advance for the help! Please answer all parts.

Amazon.com, Inc. provides the following description of its revenue recognition policies in its 2014 10-K report: We recognize revenue from product sales or services rendered when the following four criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or service has been rendered, the selling price is fixed or determinable, and collectability is reasonably assured. Revenue arrangements with multiple deliverables are divided into separate units and revenue is allocated using estimated selling prices if we do not have vendor-specific objective evidence or third-party evidence of the selling prices of the deliverables. We allocate the arrangement price to each of the elements based on the relative selling prices of each element. Estimated selling prices are management's best estimates of the prices that we would charge our customers if we were to sell the standalone elements separately and include considerations of customer demand, prices charged by us and others for similar deliverables, and the price if largely based on the cost of producing the product or service. Sales of our digital devices, including Kindle e-readers, Fire tablets, Fire TVs, Echo, and Fire phones, are considered arrangements with multiple deliverables, consisting of the device, undelivered software upgrades and/or undelivered non-software services such as cloud storage and free trial memberships to other services. The revenue allocated to the device, which is the substantial portion of the total sale price, and related costs are generally recognized upon delivery. Revenue related to undelivered software upgrades and/or undelivered non-software services is deferred and recognized generally on a straight-line basis over the estimated period the software upgrades and non-software services are expected to be provided for each of these devices. Sales of Amazon Prime memberships are also considered arrangements with multiple deliverables, including shipping benefits, Prime Instant Video, Prime Music, Prime Photo, and access to the Kindle Owners' Lending Library. The revenue related to the deliverables is amortized over the life of the membership based on the estimated delivery of services. Amazon Prime membership fees are allocated between product sales and service sales. Costs to deliver Amazon Prime benefits are recognized as cost of sales as incurred. a. What is an "arrangement with multiple deliverables?" How are revenues recognized in such arrangements? b. Assume that Amazon sells a Kindle with 3G wireless access and a commitment for future software upgrades for $190. Also assume that the device, if sold alone, would sell for $170 and that management estimates the selling price of the 3G access and software upgrades would be $30 if they were to be sold separately. What amount of revenue would Amazon recognize in the year of the sale? How would the remaining revenues be recognized? c. Record the transaction described in part b using the financial statement effects template and in journal entry form