Question
The birth of the Internet in the 1990s led to the creation of a new industry of online retailers such as Amazon, Overstock.com, and PCM,
The birth of the Internet in the 1990s led to the creation of a new industry of online retailers such as Amazon, Overstock.com, and PCM, Inc. Many of these companies often act as intermediaries between the manufacturer and the customer without ever taking possession of the merchandise sold. Revenue recognition for this type of transaction has been controversial. Assume that Overstock.com sold you a product for $200 that cost $150. The companys profit on the transaction clearly is $50. Should Overstock recognize $200 in revenue and $150 in cost of goods sold (the gross method), or should it recognize only the $50 in gross profit (the net method) as commission revenue? Required: 1. Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org). What is the specific nine-digit Codification citation (XXX-XX-XX-XX) that indicates what an entity assesses to determine whether the nature of its promise is to act as a principal or agent?
2-a. What indicators does the Codification list that suggest an entity is a principal?
2-b. Determine the specific nine-digit Codification citation (XXX-XX-XX-XX).
3. Using EDGAR (www.sec.gov), access Alphabet, Inc.s 2017 10-K. Locate the disclosure note that discusses the companys revenue recognition policy with respect to ads placed on Goggle Network Members' properties.
4. Do you agree with Alphabets reasoning with respect to choosing whether it reports revenue gross versus net with respect to these advertising services? Indicate yes or no, and explain.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started