Revenue recognition

Coffee House

Part I:

Background:

Day one: a college student walks into the Coffee House on campus and orders a large cup of black coffee.

The cashier takes the order and says it will cost $5. The student hands the cashier $5. The barista then

pours the coffee into a large cup and hands it to the student. The student then hustles off to accounting

class.

Requirements:

1.Review the summary of the five-step, revenue recognition model in ASC 606-10-05-04. Also

review ASC 606-10-25-1 and ASC 606-10-25-30.

2.For each of the five steps:

1.Describe how the revenue model applies to this transaction. For any step that is not applicable,

simply indicate it is not applicable.

2.Draw a conclusion as to whether the requirements for that step were complied with.

3.As a final conclusion, determine the amount of revenue that should be recognized and provide the

journal entry to record the transaction.