Question

Identifying the Five Steps in the Revenue Recognition Process

Match each step 1 through 5 with the sales process described in a through e.

Step 1: identify contract(s) with customer.

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

Step 3: determine transaction price.

Step 4: allocate transaction price to performance obligation(s).

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

a. The total price for the computer and two years of services is $800.

b. Customer takes possession of the computer and benefits from the data service over two years.

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

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

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

Thanks.

Answer 1

Matching as follows:

	Trn.
Step. 1 identify contract(s) with customer.	e	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.	c	Customer will receive the computer immediately and will benefit from two years of data services for the tablet.
Step. 3 determine transaction price.	a	The total price for the computer and two years of services is $800.
Step. 4 allocate transaction price to performance obligation(s).	d	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	b	Customer takes possession of the computer and benefits from the data service over two years.