301859 Flashcards
Jorge sells $150,000 of product to Wilson, and also purchases $25,000 of advertising services from Wilson. The advertising services have a fair value of $20,000. Jorge should record revenue on its sale of product to Wilson of:
$125,000.
$150,000.
$130,000.
$145,000.
$145,000
An entity should recognize a refund liability if it receives consideration from a customer and expects to refund some or all of that consideration to the customer. A refund liability is measured at the amount of consideration received or receivable for which the entity does not expect to be entitled; that is, amounts not included in the transaction price. The refund liability and corresponding change in the transaction price, and therefore the contract liability, should be updated at the end of each reporting period for changes in circumstances.
Jorge is paying more for advertising services than the fair value of those services, so the excess of $5,000 ($25,000 price paid – $20,000 fair value) is a refund of part of the $150,000 sale. Therefore, Jorge records revenue of $145,000 ($150,000 – $5,000).
Transaction Price
The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.
FASB ASC Glossary
2331.29
An entity should recognize a refund liability if it receives consideration from a customer and expects to refund some or all of that consideration to the customer.
- A refund liability is measured at the amount of consideration received or receivable for which the entity does not expect to be entitled; that is, amounts not included in the transaction price.
- The refund liability and corresponding change in the transaction price, and therefore the contract liability, should be updated at the end of each reporting period for changes in circumstances.
ASU 2016-01
