Question

A New York City daily newspaper called "Manhattan Today" charges an annual subscription fee of $108. Customers prepay their subscriptions and receive 260 issues over the year. To attract more subscribers, the company offered new subscribers the ability to pay $110 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 $110 subscription price? 2. How many performance obligations exist in this contract? 3. Prepare the journal entry to recognize sale of 14 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. Req 1 and 2 Reg 3 Prepare the journal entry to recognize sale of 14 new subscriptions, clearly identifying the revenue or deferred revenu associated with each performance obligation. (If no entry is required for a transaction/event, select "No journal entry r in the first account field.) View transaction list Journal entry worksheet < 1 > Record the sale of 14 new subscriptions. Note: Enter debits before credits. General Journal Debit Credit Transaction 1 Record entry Clear entry View general journal

Answer 1

Answer
1
Revenue = $0
2
Number of performance obligations = 2
3
	Debit	Credit
Cash	$     1,540		14*110
Deferred revenue—subscription		$     1,386	1540*90%
Deferred revenue—discount coupon		$        154	1540*10%
Workings:
Stand­alone selling price of coupon	$          12		100*40%*30%
Stand­alone selling price of a normal subscription	$        108
Total of stand­alone prices	$        120		12+108
Percentage allocated to Coupon (12/120)	10%
Percentage allocated to Subscription (108/120)	90%