Question

Identifying the Five Steps in the Revenue Recognition Process

Answer 1

Answer:

Step 1: Identify contract(s) with customer

Correct Match: Customer agrees to purchase one computer plus two years of data services for an agreed upon price.

Step 2: identify performance obligation(s) in the contract

Correct Match: Customer will receive the computer immediately and will benefit from two years of data services for the tablet.

Step 3: Determine transaction price

Correct Match: The total price for the computer and two years of services is $800.

Step 4: Allocate transaction price to performance obligation(s)

Correct Match: The standalone selling price of the computer is $500 and of the two-year service contract is $300.

Step 5: Recognize revenue when (or as) each performance obligation is satisfied through a transfer of control

Correct Match: Customer takes possession of the computer and benefits from the data service over two years.