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Eagle Inc. sold apparel to customers in May of 2020 for $240,000. At the point of sale, Eagle Inc. provided customers 2,400 coupons for 30% off purchases in June and July of 2020. The coupon is considered a separate performance obligation. Eagle Inc. estimates the standalone selling price of the apparel to be $240,000 and the standalone selling price of the coupons to be $36,000 ($30 estimated coupon value x 1,200 coupons expected to be redeemed). Determine the amount of revenue that Eagle would record in May for the sale of apparel, and the amount of revenue deferred for the customer options (coupon promotion).

Answer :

ANTHOUGOGO

Answer:

Eagle Inc.

The amount of revenue that Eagle would record in May for the sale of apparel is $240,000.  

The amount of revenue deferred for the customer options (coupon promotion) is $0.

Explanation:

a) Data and Calculations:

Sales of apparel to customers in May 2020 = $240,000

Coupons for 30% off purchases in June and July = 2,400

Standalone selling price of the apparel = $240,000

Standalone selling price of the coupons expected to be redeemed = $36,000 (1,200 * $30)

b) The amount of revenue to record in May for the sale of apparel equals $240,000.  The coupon expense of $36,000 will not be recognized by Eagle Inc. until the coupons are redeemed or used because the coupons were given to induce future purchases and not for the past purchase of apparel.

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