Analyzing and Interpreting Revenue Recognition Policies and Risks Amazon.com Inc. provides the following explanation of its revenue recognition policies in its 2015 10-K report.

Sales of our digital devices, including Kindle e-readers, Fire tablets, Fire TVs, and Echo, are considered arrangements with multiple deliverables, consisting of the device, undelivered software upgrades and/or undelivered non-software services such as cloud storage and free trial memberships to other services. The revenue allocated to the device, which is the substantial portion of the total sale price, and related costs are generally recognized upon delivery. Revenue related to undelivered software upgrades and/or undelivered non-software services is deferred and recognized generally on a straightline basis over the estimated period the software upgrades and non-software services are expected to be provided for each of these devices.

Required a???? What is an arrangement with multiple deliverables? Explain.

b???? Explain how companies account for multiple-element contracts in general.

c???? Assume Amazon sold a Kindle Paperwhite with wi-fi capabilities for $180 and the company estimated a selling price (ESP) of $20 per unit for future software upgrades. Further assume that a typical customer keeps their Kindle reader about four years. Compute the revenue Amazon would recognize at the point of sale.
d???? Use the financial statement effects template to record the initial sale of a Kindle Paperwhite with wi-fi and the accounting adjustment required at the end of the first year.