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  3. the birth of the internet in the 1990s led to the

The birth of the Internet in the 1990s led to the creation of a new...

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Accounting

The birth of the Internet in the 1990s led to the creation of a new industry of online retailers such as

Amazon, Overstock.com, and PCM, Inc. Many of these companies often act as intermediaries between

the manufacturer and the customer without ever taking possession of the merchandise sold. Revenue

recognition for this type of transaction has been controversial.

Assume that Overstock.com sold you a product for $200 that cost $150. The companys profit on the

transaction clearly is $50. Should Overstock recognize $200 in revenue and $150 in cost of goods sold

(the gross method), or should it recognize only the $50 in gross profit (the net method) as commission

revenue?

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