Business, 07.03.2020 04:43 NeVaRkLoE

On the first day of the semester, a student walks into the University’s 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.

Answers: 1

Show answers

Answers

Answer from: ellaemtagedeane

Explanation:

Step 1: Identify the contract with the customer

-Approval and commitment

- Identification of the rights of the parties – The student has a right to the coffee and mug and the Coffeehouse has a right to payment.

-Identification of payment terms – A $7 payment will be required before delivery of the coffee and mug.

-The contract has commercial substance – The student is exchanging cash for coffee and a mug.

-It is probable that the consideration will be collected – The consideration of $7 cash is paid before delivery.

Conclusion: It appears there is a valid, implied contract with a customer.

Step 2: Identify the performance obligation. The performance obligations are the Coffee House’s obligation to transfer a cup of coffee and to transfer a mug to the student. The cup of coffee and mug would each be considered distinct goods or services if both of the following criteria are met per ASC 660-10-25-19

:►Capable of being distinct – The student can benefit from the coffee or mug either on their own or together with other resources that are readily available to the student .Per ASC 660-10-25-20, the fact that the Coffee House sells the coffee and mug separately indicates that the student can benefit from the coffee and mug on their own.

►Distinct within the context of the contract – The Coffee House’s promise to transfer the coffee is separately identifiable from the promise to transfer the mug.ASC 606-10-25-21 identifies three factors that should be considered to evaluate this criteria. The Coffee House does not provide a significant service of integrating the coffee with the mug as a bundle. The student could drink their cup of coffee in a paper cup instead, and the Coffee House would provide a similar service by pouring the coffee. The additional service of providing a paper cup would not be considered significant.–The cup of coffee does not modify or customize the coffee mug or vice versa.–The cup of coffee is not highly dependent on or highly interrelated with the coffee mug. The student can receive the coffee in a paper cup.

Conclusion: There are two performance obligations — one for the coffee and one for the mug. Both the coffee and the mug can be enjoyed by themselves and the transfer of the coffee is separate from the transfer of the mug.

Step3: Determine the transaction price

The transaction price in this case is $7

Conclusion: The transaction price is $7

Step4: Allocate the transaction price to the performance obligations

The Coffee House should allocate the $7 transaction price based on the product’s relative standalone selling price as follows

Obligation

Standalone selling price

Percentage

Allocated transaction price

Coffee

$5.00

62.50%

$4.38

Coffee mug

37.5

2.62

Total

$8.00

100%

$7.00

Step 5: recognize revenue as performance obligation is satisfied Coffee, recognized at a point in time Coffee House has right to payment Student has right to coffee. Coffee House has transferred coffee to student. Student has risks and rewards recognized at a point in time Coffee House has received payment Student has right to mug Coffee House has not transferred mug to Conclusion Recognize revenue as each performance obligation is satisfied

Conclusion: Recognize revenue as each performance obligation is satisfied.

Delivery of Coffee

Cash $4.38

Sales Revenue $4.38

Delivery of Coffee mug

Cash $2.62

Unearned revenue $2.62

Answer from: Quest

its ii) i did this test

explanation:

Answer from: Quest

start networking with people and see what is availble

Another question on Business

Business, 22.06.2019 07:20

Richardson hired j.c. flood company, a plumbing contractor, to correct a stoppage in the sewer line of her house. the plumbing company's 'snake' device, used to clear the line leading to the main sewer, became caught in the underground line. to release it, the company excavated a portion of the sewer line in richardson's backyard. in the process, the company discovered numerous leaks in a rusty, defective water pipe that ran parallel with the sewer line. to meet public regulations, the water pipe, of a type no longer approved for such service, had to be replaced either then or later, when the yard would have to be excavated again. the plumbing company proceeded to repair the water pipe. though richardson inspected the company's work daily and did not express any objection to the extra work involved in replacing the water pipe, she refused to pay any part of the total bill after the company completed the entire operation. j.c. flood company then sued richardson for the costs of labor and material it had furnished. (c) for what, if anything, should richardson be liable? explain."

Answers: 1

Answer

Business, 22.06.2019 13:10

Trey morgan is an employee who is paid monthly. for the month of january of the current year, he earned a total of $4,538. the fica tax for social security is 6.2% of the first $118,500 earned each calendar year, and the fica tax rate for medicare is 1.45% of all earnings for both the employee and the employer. the amount of federal income tax withheld from his earnings was $680.70. his net pay for the month is .

Answers: 1

Answer

Business, 22.06.2019 17:30

Jeanie had always been interested in how individuals and businesses effectively allocate their resources in order to accomplish personal and organizational goals. that’s why she majored in economics and took on an entry-level position at an accounting firm. she is very interested in further advancing her career by looking into a specialization that builds upon her academic background, and her interest in deepening her understanding of how companies adjust their operating results to incorporate the economic impacts of their practices on internal and external stakeholders. which specialization could jeanie follow to get the best of both worlds? jeanie should chose to get the best of both worlds.

Answers: 2

Answer

Business, 22.06.2019 18:00

During the holiday season, maria's department store works with a contracted employment agency to bring extra workers on board to handle overflow business, and extra duties such as wrapping presents. maria's is using during these rush times.

Answers: 3

Answer

You know the right answer?

On the first day of the semester, a student walks into the University’s Coffee House and orders a la...

Questions