Question

Aria Perfume, Inc., sold 2,870 boxes of white musk soap during January of 2021 at the price of $80 per box. The company offers a full refund to unsatisfied customers for any product returned within 30 days from the date of purchase. Based on historical experience, Aria expects that 4% of sales will be returned.
How many performance of obligations are there in each sale of a box of soap?
How much revenue should Aria recognize in January?

Answer 1

Answer:

a. One performance obligation

b. Revenue $220,416

Explanation:

a. Based on the information given the PERFORMANCE OF OBLIGATIONS that are there in each sale of a box of soap is ONE.

b. Calculation to determine How much revenue should Aria recognize in January

Using this formula

Revenue= (Number of boxes sold × Price per box) - (Sales returned percentage ×Number of boxes sold* Price per box)

Let plug in the formula

Revenue=( 2,870 boxes × $80)- (4% × 2,870 boxes × $80)

Revenue= $229,600 - $9,184

Revenue= $220,416

Therefore revenue that Aria should recognize in January is $220,416