Question on sales and unearned revenue
This same style of question has already been posted and I have tried going through the expert answer and getting my own numbers, but I still cannot get the problem right.
Question 1 Partially correct Mark 3.20 out of 6.00 Flag question 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 performance 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 servicesWe 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 transactions. 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 subscription 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 recognized 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. 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 membership costs $120. Suppose the price charged for the combination is $200, and a customer buys the combination on July 1. What amount of revenue would Amazon recognize in the third calendar quarter (July through September)? How would the remaining revenues be recognized? Required Record the transactions described above using the financial statement effects template and in journal entry form. Note: Round all answers to two decimal places. Balance Sheet Income Statement Noncash Earned Transaction Cash Asset Assets Liabilities Capital Capital Revenues Expenses Net Income To record bundle sale transaction on July 1. 230 X + 0 120 X + 0 + 110 X 110 x To recognize Prime revenue at end of quarter 0 30 X + O + 30 x 30 X 0 30 x Contrib. + + 0X 0 Credit Description Cash Sales revenue Unearned revenue Debit 220 X 0 0 105.93 X 114.07 x - 0 28.25 x To record sale. Unearned revenue Sales revenue To recognize revenue at end of quarter. 0 28.25 X
