problem 89

ginal contracts (with extensions). Revenue earned in year two for original contracts (with extensions) Warranty costs in year one. s. Warranty costs in year two. econcile the contract liability account from 2020-2022. Hint: Begin with the Hint: Begin with the contract liability from the extensions to the contract liability service contract and add or subtract, as appropriate, reversals and e the gross profit percentage on the printer sales in total (for all contracts and years combined). and the profitability margin on the service contract Accounting Decisions and Judgments A Transition Resource Group for Revenue Recognition Case (TRG) was established by the FASB to AD& nt on questions from companies transitioning to ASC 606. The topic of TRG Memo No. 59 is the accouhAa Cyment to customers in the revenue recognition process. The following is i a summaryof nxe oeot presented by the TRG Service Provider makes a $1 million payment to a customer as part of the negotiations i T outsourcing services. The payment to the customer was negotiated because the customer o teminate employees and dispose of equipment that is currently utlized in the operations to he entity estimates that the customer will pay a fee of $6 million for five years of services. The cellable at the end of any month for no penalty, although Service Provider expects to purchase services given the customer terminated employees and disposed of equipment. Additionally, the customer significant setup costs and will incur the significant setup costs to change vendors. Finaily knows from past experience with entering into similar contracts with other customers that most customers not cancel Pay a contract to provide will incur costs contract is can- the customer to continue internally for five years because the customer has limited ability to perform the services do contracts. Service Provider has no previous revenue from contracts with this customer Required a. Locate TRG Memo No. 59 from the FASB website (fasb.org) and indicate (1) the date of the memo, C2 main question addressed by the TRG, and (3) the Codification s The TRG Memo No. 59 references ASC 606-10-32-27 in the discussion regarding the timing of recogni- tion of consideration payable as a reduction of revenue when consideration payable was accounted for as a reduction of a transaction price. Why is this Codification reference relevant? Briefly summarize how two different views evolved from this particular Codification reference. andard that is referenced for the question b. c. In the example provided above, how would the consideration payable be recognized under the two different d. What view do you support in reference to this example? Explain. Real World Analysis views described in part b? Alphabet Inc. (Google) reported the following disclosure in a recent Form 10-Q For ads placed on Google Network Members' properties, we evaluate whether we are the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis). Generally, we report advertising revenues for ads placed on Google Network Members' properties on a gross basis, that is, the amounts billed to our customers are recorded as revenues, and amounts paid to publishers are recorded as cost of revenues We are the principal because we control the advertising inventory before it is transferred to our customers. Our control is evidenced by our sole ability to monetize the advertising inventory, being primarily responsible to our customers, having discretion in establishing pricing, or a combination of these is determining whether we are As it relates to Google's other revenues, the most he principal or agent for app sales and in-app purchases through rom these transactions on a net basis because our performance obligation is to facilitate a transaction be- ween app developers and end users, for which we earn a com mount billed to end users that is remitted to app developers is uired Does Goople renort Play store. We report revenues the portion of the gross as revenues. s at gross or