A New York City daily newspaper called “Manhattan Today” charges an annual subscription fee of $135. Customers prepay their subscriptions and receive 260 issues over the year. To attract more subscribers, the company offered new subscribers the ability to pay $130 for an annual subscription that also would include a coupon to receive a 40% discount on a one-hour ride through Central Park in a horse-drawn carriage. The list price of a carriage ride is $125 per hour. The company estimates that approximately 30% of the coupons will be redeemed.

Required:

1.	How much revenue should Manhattan Today recognize upon receipt of the $130 subscription price?

Revenue

$0

 

2.	How many performance obligations exist in this contract?

Number of performance obligations: 2

3.

Prepare the journal entry to recognize sale of 10 new subscriptions, clearly identifying the revenue or deferred revenue associated with each performance obligation. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

	Transaction	General Journal	Debit	Credit
1	1	Cash	1,300
2		Deferred revenue—subscription
3		Deferred revenue—discount coupon