Antonio’s Car Services provides maintenance services for
motorized vehicles. In March 2018, Rick placed an order for a new
set of tires for $350. When a customer purchases goods or services
in excess of $300, Antonio’s gives the customer a 25% discount
coupon for future purchases made in the next three months.
Antonio’s estimates that approximately 80% of customers utilize the
coupon and that on average those customers will purchase goods or
services that typically sell for $75.
Required:
(a) How many performance obligations are in Rick’s
contract?
(b) Prepare a journal entry to record revenue for
this transaction, assuming that Antonio’s uses the residual method
to estimate the stand-alone selling price of new tires sold without
the discount coupon.
Fact of the case | |
In $ | |
Particulars | Discount obligation |
Discount coupon avail by 100% customer | 25% |
Discount coupon avail by 80% customer (25% *80/100) | 20% |
Customer average expected purchase in next 3 months | 75 |
Rick's contract price | 350 |
Threshold for coupon entitlement |
300 |
Expainations | 1. It is observed from the fact of the case that discount is on sale of goods or services, hence it shall be considered as trade discount |
Ans(a) | Performance obligation in Rick's contract | ||
In $ | |||
Coupon value (350*.25*.8) | 70 | ||
Ans(b) | Journal enteries for recording the revenue | Debit | Credit |
1 | Cash/Bank | 350 | |
To sale | 350 | ||
(being sale made Rick) | |||
2 | Sale | 350 | |
To profit and loss A/C | 350 | ||
(Being revenue recorded) | |||
3 | Discount on sale | 70 | |
To Unrealized Coupon obligation | 70 | ||
(being discount coupon obligation created) | |||
4 | Unrealized Coupon obligation | 70 | |
To Inventories A/C | 70 | ||
(being coupon realized by customer in 3 months) |
Antonio’s Car Services provides maintenance services for motorized vehicles. In March 2018, Rick ...
Problem 1 (2/4, 6 points total) Antonio's Car Services provides Rick placed an order for an ar Services provides maintenance services for motorized vehicles. In March 2018, aced an order for a new set of tires for $350. When a customer purchases goods or services in excess of $300. Antonio's gives the customer a 25% discount coupon for future purchases made in the next three months. Antonio's estimates that approximately 80% of comers utilize the coupon and that on average...
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Clarks Inc., a shoe retailer, sells boots in different styles. In early November the company starts selling "SunBoots" to customers for $70 per pair. When a customer purchases a pair of SunBoots, Clarks also gives the customer a 30% discount coupon for any additional future purchases made in the next 30 days. Customers can't obtain the discount coupon otherwise. Clarks anticipates that approximately 20% of customers will utilize the coupon, and that on average those customers will purchase additional goods...
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ailer, sells boots in different styles. In early November the company starts selling "SunBoots"' to customers for $65 per pair. When a customer purchases a pair of SunBoots, Clarks future purchases made in the next 30 days. Customers can't obtain the discount coupon otherwise. Clarks anticipates that approximately 20% of customers will utilize the coupon, and that on average those customers will purchase normally sell for $120. also give s the customer a 30% discount coupon for any additional additional...
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