Question

Assume AuctionCo takes control of this used bicycle before the sale and pays $200 to the supplier. Under this assumption, how much revenue would AuctionCo recognize at the time of the sale to the customer?Assume AuctionCo never takes control of this used bicycle before the sale. Instead, the bicycle is shipped directly to the customer by the original bicycle owner, and then AuctionCo pays $200 to the supplier. Under this assumption, how much revenue would AuctionCo recognize at the time of the sale to the customer?Assume AuctionCo promises to pay $200 to the supplier regardless of whether the bicycle is sold, but the bicycle will continue to be shipped directly from the supplier to the customer. Under this assumption, how much revenue would AuctionCo recognize at the time of the sale to the customer?

Answer 1

Answer:

1. $300
2. $100
3. $300

Explanation:

1. AuctionCo takes control of this used bicycle before the sale and pays $200 to the supplier.

Revenue will be the $300 that the bicycle was sold for because they took control.

2. AuctionCo never took control.

Revenue will be the amount they earned for being agents;

= Sales price - Cash to supplier

= 300 - 200

= $100

3. Assume AuctionCo promises to pay $200 to the supplier regardless of whether the bicycle is sold...

= $300

Revenue is $300 because Auction assumes control when they promise to pay $200 regardless.