Wilson Links Products sells a product that involves two separate performance obligations: the SwingRight golf club weight and the SwingCoach teaching software. SwingRight has a stand-alone selling price of $150. Wilson sells both the SwingRight and the SwingCoach as a package deal for $200. The SwingCoach software is not sold separately. Wilson is aware that other vendors charge $100 for similar software, and Wilson's prices are generally 10% lower than what is charged by those vendors. Wilson estimates that it incurs approximately $65 of cost per copy of the software, and usually charges 50% above cost on similar products.
Estimate the stand-alone selling price of the software using the expected cost plus margin approach.
The Ultimate Frisbee League (UFL) licenses its trademark to Tank-Skin Apparel. Under the license arrangement, Tank-Skin pays the UFL a $1 million initial license fee plus a bonus when annual sales of Tank-Skin merchandise reach a threshold. The license agreement is for 4 years.
How much of the $1 million initial license fee should the UFL recognize as revenue in the first year of the contract?
- $250,000
- $1,000,000
- $0
- Cannot tell from information given.
Which of the following is not one of the five steps for recognizing revenue?
- Estimate variable consideration.
- Determine the transaction price.
- Recognize revenue when (or as) each performance obligation is satisfied.
- Allocate the transaction price to each performance obligation.
Which of the following is correct about changes in estimated variable consideration?
- Changes in estimated variable consideration should be applied retroactively to all periods affected.
- Changes in estimated variable consideration should be allocated retrospectively to all prior periods.
- Changes in estimated variable consideration should be recognized as an adjustment to revenue in the period the change in estimate is made.
- Changes in estimated variable consideration are not recognized in periods after transaction price is first estimated.
Which of the following is not an indicator that the customer is likely to have control over a good?
- Legal title to the asset
- Accepted the asset
- Asset warehoused by seller-affiliated third party
- Physical possession of the asset
A contract does not exist for purposes of applying the revenue recognition principle in all of the following cases except for when:
- The seller and buyer did not sign a formalized written contract.
- The seller believes it is not probable that it will collect the amount it's entitled to receive under the contract.
- The seller and buyer can terminate the contract without penalty and neither has performed any obligations under the contract.
- The seller believes it is highly likely but not certain that the buyer will agree to the terms of the contract.