Question

A New York City daily newspaper called "Manhattan Today" charges an annual subscription fee of $138. Customers prepay their subscriptions and receive 230 issues over the year. To attract more subscribers, the company offered new subscribers the ability to pay $125 for an annual subscription that also would include a coupon to receive a 40% discount on a one-hour ride through Central Park in a horse-drawn carriage. The list price of a carriage ride is $100 per hour. The company estimates that approximately 30% of the coupons will be redeemed. Required: 1. How much revenue should Manhattan Today recognize upon receipt of the $125 subscription price? 2. How many performance obligations exist in this contract? 3. Prepare the journal entry to recognize sale of 12 new subscriptions, clearly identifying the revenue or deferred revenue associated with each performance obligation Complete this question by entering your answers in the tabs below. Reg 1 and 2 Reg 3 1. How much revenue should Manhattan Today recognize upon receipt of the $125 subscription price? 2. How many performance obligations exist in this contract? 1. Revenue 2 Number of performance obligations

Answer 1

1
Revenue = $0
2
Number of performance obligations = 2
3
	Debit	Credit
Cash	1500		=125*12
Deferred revenue—subscription		1380	=1500*92%
Deferred revenue—discount coupon		120	=1500*8%
Workings:
Stand­alone selling price of coupon	12	=100*40%*30%
Stand­alone selling price of subscription	138
Total of stand­alone prices	150
Percentage allocated to—subscription	92%	=138/150
percentage allocated to—discount coupon	8%	=12/150