Mixer Up (MU) manufactures cordless mixers for use in the kitchens of consumers. MU sells to retailers, which sell the mixers to the ultimate consumer. One of MU’s retail customers is Kitchen Hardware (KH). On January 1, MU sells to and receives payment from KH for 100 cordless mixers with a one-year warranty for $50 each. The mixers are delivered by MU to KH upon receipt of payment and the warranty is initiated at that time as well by MU. This warranty provides for a replacement of the mixer if the mixer fails to work properly within one year of the date of purchase. MU also sells its mixers with no warranty for $40 per unit. The cost to manufacture each mixer is $32.

MU also provides its retail customers with sales incentives in the form of volume discounts on purchases of mixers with warranties paid at the end of an annual period. The agreement between MU and KH provides for the following volume discounts. Additionally, the probability of purchases for each volume level as estimated by MU is provided based on historical experience and forecasted sales.

Number of mixers purchased	Discount	Probability
less than 1000	0%	40%
1000 through 1999	5%	40%
2000 or more	10%	20%

The discounts are retroactive. If 2,000 mixers are purchased during the year, a discount of 10% will be applied to all 2,000 mixers.

Requirements

1. Record all accounting entries for MU for the month of January based on the current guidance on revenue recognition in ASC 605 (10 points). Include references to the guidance to support your proposed accounting (5 points). Show any calculations you make to support your journal entries for partial credits.

2. Based on the new guidance on revenue recognition in ASC 606, please prepare a detailed explanation (use your own words based on this specific case for MU, please do not copy and paste from the guidance) of each of the five steps for revenue recognition. Record all accounting entries for MU for the month of January (10 points). Please include references to the guidance to support your proposed accounting (10 points). Show any calculations you make to support your journal entries.