While checking out, Janet sees a deal, for $80, she can purchase an Amazon Echo Dot and
Question:
While checking out, Janet sees a deal, for $80, she can purchase an Amazon Echo Dot and an Amazon prime Student (APS) membership. By signing up for APS she has access to Prime Storage (100 GB of cloud file storage) for one year, Prime Music and Video (unlimited video and music streaming), and Prime Shipping (free two-day shipping). If sold separately, Amazon would charge the following prices:
- Echo Dot = $49 (The cost of a dot is $22. Shipping is $12)
- Amazon prime Student = $49 / year.
- Prime Storage = $10/year for 100 GB (Based on Dropbox pricing.)
- Prime Video and Music = $60/year (Based on Spotify / Hulu pricing.)
- Prime Shipping = $30/year
Additional information
Five Steps of Revenue Recognition:
Step 1: Identify the contract with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
For scenario , complete the five-step process for revenue recognition. For scenario, you should have a journal entry and note when the journal entry is recorded.
What is Amazon’s journal entry if Janet takes the Echo / APS deal? Are subsequent journal entries made? How much and when?
Managerial Economics and Strategy
ISBN: 978-0134167879
2nd edition
Authors: Jeffrey M. Perloff, James A. Brander