Recording Entries for Contracts with Multiple Performance Obligations
Amazon.com, Inc., provides the following description of its revenue recognition policies in its second quarter of 2020 10-K report.
Revenue
venue is measured based on the amount of consideration that we expect to receive, reduced by estimates for return Revenue is measured based on the amount of consideration it we expect to receive, reduced by estimates for return allowances, promotional discounts, rebates. Revenue also excludes any
amounts collected on behalf of third parties, including sales and indirect taxes. In arrangements where we have multiple performance obligations, the transaction price is allocated to each performance obligation using the relative stand-alone selling price. We generally determine stand-alone selling prices based on the
prices charged to customers or using expected cost plus a margin.
A description of our principal revenue generating activities is as follows:
e is recognized when control Retail sales-We offer consumer products through
r, which generally occurs upon our
Retail sales-We offer consumer products through o
and physical ston
online and physical stores. Revenue is recognized when control of the goods is transferred to t
delivery to a third-party carrier or, in the e of an Amazon delivery, to the customer.
Subscription services-Our subscription
include
associated with
ime memberships and access to Subscription services-Our subscription sales include fees associated with Amazon Prime memberships and access to content including digital video, audiobooks, digital music, ebooks, and othe
AWS subscription services. Prime memberships provide
customers access to an evolving suite of benefits that represent a single stand-ready obligation. Subscriptions are paid for at the time of o
advance of delivering the services. Revenue from such arrangements is recognized over the subscription period.
Third-party seller services-We offer programs that enable sellers to sell their products in our stores and fulfill Third-party seller services-We offer programs that enable sellers to sell their products
stores and fulfill orders through us. We
seller of record in these transactions. The commissions and any
related fulfillment and shipping fees we earn from these arrangements are recognized when the services are rendered, which generally occurs upon delivery of the related products to a third-party carrier or,
case of an Amazon delivery, to the customer.
AWS-Our AWS sales arrangements include global sales of compute, storage, database, and other services. Revenue is AWS-Our AWS sales arrangements include global sales of compute, storage, database, and other services. Revenue is allocated to services using stand-alone selling prices and is primarily recognized
when the customer uses these services, based on the quantity of services rendered, such as compute or storage capacity delivered on-demand. Certain services, including compute and database, are also offered as a fixed quantity over a specified term, for which revenue is recognized ratably. Sales commissions we pay
in connection with contracts that don
capitalized and amortized the contract term.
Other-Other revenue primarily includes sales of advertising services, which recognized a are delivered Other-Other revenue primarily includes sales of advertising services, which are recognized as ads are delivered based on the number clicks or impressions.
Suppose that Amazon.com sells a e Tablet with a one-year membership in Amazon Prime. Assume that the device has a stand-alone selling price of $182, and a one-year Prime membership costs $198. Suppose the price charged for the combination is $330, and a customer buys the combination on July 1.
Record the July 1
action described above in journal entry form.
Note: Round answers to two decimal places.
Account
Debit
Credit
Cash
330.00
Unearned revenue
158.05
Sales revenue
171.95
To record bundle sale.
Unearned revenue
14.33
Sales revenue
14.33
To recognize membership revenue.
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