On the first day of the semester, a student walks into the Universitys Coffee House and orders a large coffee in a campus-branded, thermal coffee mug as part of a welcome back to school 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:

Prepare a proper form with reference to the proper sections of the FASB codification

-Review ASC 606 for the five steps in the revenue recognition model paying special attention to ASC 606-10-25-19 through 22 and ASC 606-10-32-31 through 32.

-For each of the five steps:

-Analyze how each revenue model step applies to this transaction. Refer to the proper ASC section in your memo. 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.

Source: E&Y Foundation