Identifying the Five Steps in the Revenue Recognition Process

Match each step $1$ through $5$ with the sales process for a product as described in a through e$.$

Revenue Recognition Steps

Step $1$: Identify the contract with customer.

Step $2$: Identify the performance obligation$($s$).$

Step $3$: Determine the transaction price.

Step $4$: Allocate the transaction price to performance obligation$($s$).$

Step $5$: Recognize revenue when $($or as$)$ each performance obligation is satisfied through a transfer of control.

Description of the Steps in a Sale of an Electronic Tablet

Answer $1$Step $1$Step $2$Step $3$Step $4$Step $5$a$.$ The total price for the tablet and two years of services is $$600.$Answer $2$Step $1$Step $2$Step $3$Step $4$Step $5$b$.$ Customer takes possession of the tablet and benefits from the data service over two years.Answer $3$Step $1$Step $2$Step $3$Step $4$Step $5$c$.$ Customer will receive the tablet immediately and will benefit from two years of data services.Answer $4$Step $1$Step $2$Step $3$Step $4$Step $5$d$.$ The standalone selling price of the tablet is $$400$ and of the two$-$year service contract is $$200.$Answer $5$Step $1$Step $2$Step $3$Step $4$Step $5$e$.$ Customer agrees to purchase a tablet plus two years of data services for an agreed upon price.