f. Refer to Apple’s revenue recognition footnote. In particular, when does the company recognize revenue for...

f. Refer to Apple’s revenue recognition footnote. In particular, when does the company recognize revenue for the following types of sales?

i. iTunes songs sold online.

ii. Mac-branded accessories such as headphones, power adaptors, and backpacks sold in the Apple stores. What if the accessories are sold online?

iii. iPods sold to a third-party reseller in India.

Solutions

Expert Solution

Certain sales made through the iTunes Store, Apple is not the primary owner to theusers of the software and the third-party developers determine the selling price for theirsoftware. So Apple accounts for these third-party sales on a net basis by only recognizingrevenue commission that it retains from each sale and includes the commission in the netsales in their Consolidated Statement of Operations. Following the sale, the sales price paidby the iTunes customer is forwarded by Apple to the third-party and is not reflected onApples Consolidated Statement of Operations.
Apple sells their accessories online as well as in their Apple retail stores. The same risksapply whether you sell these asseccory products online or at the store. Apple establishes theirown pricing and retains related inventory risks that come along with the products. Apple is theprimary contact in the sales transactions with its customers and assumes all the credit risk for theamounts billed to its customers.Apple generally recognizes revenue for the sale of productsobtained from their customers based on the total amount billed to that customer.
Apples products are considered delivered to the third-party reseller in India when it hasbeen shipped and the title and risk of loss have been transferred. For most of Apple's productsales, these criteria are met at the time the product is shipped and then received from the third-party reseller in India. Apple defers revenue until the reseller in India receives the productsbecause Apple is legally bound to a portion of the risk of loss on these sales during transit. Oncethe Indian reseller has received the iPods, than Apple can finally recognize revenue.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

For each situation indicate when a company should recognize revenue: Situation Recognition of Revenue a. On...

For each situation indicate when a company should recognize revenue: Situation Recognition of Revenue a. On June 2, 2017, a customer books travel on an airline, paying $500 for a round-trip ticket that departs July 15, 2017, and returns July 20, 2017. In addition, once the round-trip ticket is used, the airline credits the passenger's frequent-flier account for 500 miles. The airline determines that each frequent-flier point has a value of $0.01. b. On May 1, 2017, a retailer enters...

1. determine when the seller should recognize revenue. 2. Explain your answer using GAAP revenue recognition guidelines....

1. determine when the seller should recognize revenue. 2. Explain your answer using GAAP revenue recognition guidelines. 3. Explain how each transaction would appear on the income statement and balance sheet for 2017. Case 3-Your company sells a product bundle of software that includes a 3 year service contract for $100,000, Your company installed the software on July 1, 2018, and the client paid $50,000 cash. Thebalance is due on December 31, 2018. Identify the performance obligations and the revenue in...

1. determine when the seller should recognize revenue. 2. Explain your answer using GAAP revenue recognition guidelines....

1. determine when the seller should recognize revenue. 2. Explain your answer using GAAP revenue recognition guidelines. 3. Explain how each transaction would appear on the income statement and balance sheet for 2017. Case 1: Your construction company entered into a four year contract to build a store for a fixed price of$7,000,000. You estimated your costs at 6,200,000. At the end of the 2nd year you estimate that you are 50% complete and your estimate to complete will be 7,500,000 because of...

25. Revenue recognition is a major accounting challenge. Most industrial and retail firms recognize revenue as...

25. Revenue recognition is a major accounting challenge. Most industrial and retail firms recognize revenue as earned at the point of sale. More generally, according to IAS 18, revenue from the sale of goods should be recognized when the significant risks and rewards of ownership have been transferred to the buyer, the seller loses control over the items, the revenue and related costs can be measured reliably, and collection is reasonably assured. Revenue from services and long-term contracts can be...

Does the accounting change in revenue recognition for a new system which requires the recognition of...

Does the accounting change in revenue recognition for a new system which requires the recognition of deferred revenue matter to managers?

What does article mean? Revenue Recognition Revenue recognition for multiple-element arrangements requires judgment to determine if...

What does article mean? Revenue Recognition Revenue recognition for multiple-element arrangements requires judgment to determine if multiple elements exist, whether elements can be accounted for as separate units of accounting, and if so, the fair value for each of the elements. Judgment is also required to assess whether future releases of certain software represent new products or upgrades and enhancements to existing products. Certain volume licensing arrangements include a perpetual license for current products combined with rights to receive unspecified...

When does the new revenue recognition standard go into effect for private companies and what steps...

When does the new revenue recognition standard go into effect for private companies and what steps can these private companies take to make sure they are able to make an effective transition to the new standard?

Refer to the revenue recognition practices of Qwest Communications outlined in Theory in Practice 1.1. Required...

Refer to the revenue recognition practices of Qwest Communications outlined in Theory in Practice 1.1. Required a. Use the concept of relevance to argue that firms should record revenue as earned as early as possible in their operating cycles. Was Qwest’s revenue recognition policy relevant? Explain. b. Use the concept of reliability to argue that firms should wait until the significant risks and rewards of ownership are transferred to the buyer, and there is reasonable assurance of collection, before recording...

(1) What do we mean by revenue recognition? What does GAAP say about proper revenue recognition?...

(1) What do we mean by revenue recognition? What does GAAP say about proper revenue recognition? (2) Why is the audit of revenue recognition riskier for a new company? (3) What are some justifications for not using confirmations of accounts receivable on a particular audit?

A company is evaluating a revenue arrangement to determine proper revenue recognition. The contract is for...

A company is evaluating a revenue arrangement to determine proper revenue recognition. The contract is for manufacturing 20 race cars. The customer needs the cars by May 1, 2021. The customer provides a bonus payment of $320,000 if all cars are delivered by the May 1 deadline. The bonus is reduced by a fourth of the total available bonus amount (i.e., reduced by $320,000 divided by 4) each week that the cars are delivered after the deadline until no bonus...

Subjects