Question

In: Accounting

A New York City daily newspaper called “Manhattan Today” charges an annual subscription fee of $594....

A New York City daily newspaper called “Manhattan Today” charges an annual subscription fee of $594. Customers prepay their subscriptions and receive 290 issues over the year. To attract more subscribers, the company offered new subscribers the ability to pay $560 for an annual subscription that also would include a coupon to receive a 40% discount on a one-hour ride through Central Park in a horse-drawn carriage. The list price of a carriage ride is $550 per hour. The company estimates that approximately 30% of the coupons will be redeemed.

Required:

  1. How much revenue should Manhattan Today recognize upon receipt of the $560 subscription price?

  2. How many performance obligations exist in this contract?

  3. Prepare the journal entry to recognize sale of 11 new subscriptions, clearly identifying the revenue or deferred revenue associated with each performance obligation.

Solutions

Expert Solution

Solution:

1) Revenue to be recognized : $ 0.

Reason: As it is an prepayment, revenue should not be recognized until there is transfer of goods or services by Manhattan Today to the customer.

2) Number of performance obligations : 2

Reason: Delivery of newspapers is the first performance obligation. The coupon for a 40% discount on the carriage ride through Central Park is the second performance obligation.

3)

General Journal Debit   Credit
Cash 6160 =560*11
      Deferred revenue—subscription 5544 =6160*90%
      Deferred revenue—discount coupon 616 =6160*10%
Workings:
Stand­alone selling price of coupon 66 =550*40%*30%
Stand­alone selling price of subscription 594
Total of stand­alone prices 660
Percentage allocated to—subscription 90% =594/660
percentage allocated to—discount coupon 10% =66/660

Note: if you happy with this answer give a thumsup. Thank you??


Related Solutions

A New York City daily newspaper called “Manhattan Today” charges an annual subscription fee of $135
A New York City daily newspaper called “Manhattan Today” charges an annual subscription fee of $135. Customers prepay their subscriptions and receive 260 issues over the year. To attract more subscribers, the company offered new subscribers the ability to pay $130 for an annual subscription that also would include a coupon to receive a 40% discount on a one-hour ride through Central Park in a horse-drawn carriage. The list price of a carriage ride is $125 per hour. The company estimates that approximately 30%...
A New York City daily newspaper called "Manhattan Today" charges an annual subscription fee of $108....
A New York City daily newspaper called "Manhattan Today" charges an annual subscription fee of $108. Customers prepay their subscriptions and receive 270 issues over the year. To attract more subscribers, the company offered new subscribers the ability to pay $110 for an annual subscription that also would include a coupon to receive a 40% discount on a one-hour ride through Central Park in a horse-drawn carriage. The list price of a carriage ride is $100 per hour. The company...
A New York City daily newspaper called “Manhattan Today” charges an annual subscription fee of $216....
A New York City daily newspaper called “Manhattan Today” charges an annual subscription fee of $216. Customers prepay their subscriptions and receive 260 issues over the year. To attract more subscribers, the company offered new subscribers the ability to pay $210 for an annual subscription that also would include a coupon to receive a 40% discount on a one-hour ride through Central Park in a horse-drawn carriage. The list price of a carriage ride is $200 per hour. The company...
The daily demand for hotel rooms on Manhattan Island in New York is given by the...
The daily demand for hotel rooms on Manhattan Island in New York is given by the equation QD = 250,000 - 375P. The daily supply of hotel rooms on Manhattan Island is given by the equation QS = 15,000 + 212.5P (Use 100$ as the beginning and 600$ as the last price). a. Calculate and provide the demand and supply schedule. (15pts.) b. What is the equilibrium quantity and equilibrium price?
A major daily newspaper charges $460 (paid in advance) for an annual subscription, or $47 per month payable at the end of each month to the carrier.
A major daily newspaper charges $460 (paid in advance) for an annual subscription, or $47 per month payable at the end of each month to the carrier. What is the effective interest rate being charged to the monthly payment subscribers? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Effective interest rate %
1. K. Holman operates a newspaper kiosk in Grand Central Station in New York City, a...
1. K. Holman operates a newspaper kiosk in Grand Central Station in New York City, a major commuter rail terminus in downtown Manhattan. The kiosk is 300 cubic feet (length x width x height) and Holman uses every cubic inch of it to stock newspapers, magazines, and snack foods. Holman estimates that the contribution margin ratios on newspapers, magazine, and snack food items are 10%, 25% and 20%, respectively. In addition, for equivalent sales in dollars, newspapers take up 5...
A certain newspaper has an annual subscription price of $338, and annual variable costs per subscriber...
A certain newspaper has an annual subscription price of $338, and annual variable costs per subscriber are $300. Current retention spending is $8 a year per customer resulting in an attrition rate of 23% per year. The marketing department estimates that if the newspaper were to increase its retention spending to $12 a year, the attrition rate would be reduced to 15%. What would be the difference in the CLV if the spending is increased and a discount rate of...
The former mayor of New York City called for a ban on supersized sugary drinks at...
The former mayor of New York City called for a ban on supersized sugary drinks at delis, fast-food restaurants, and sports areas in the city, saying that obesity is a national epidemic and New York should take the lead in doing something about the problem. While some consumer groups backed the proposed ban, other industry groups and companies objected. Do you think such a ban would help in the fight against obesity? If you were a marketing manager for a...
The cost of a daily newspaper varies from city to city. However, the variation among prices...
The cost of a daily newspaper varies from city to city. However, the variation among prices remains steady with a standard deviation of $0.20. A study was done to test the claim that the mean cost of a daily newspaper is $1.00. Ten costs yield a mean cost of $0.97 with a standard deviation of $0.18. Do the data support the claim at the 1% level? Note: If you are using a Student's t-distribution for the problem, you may assume...
The cost of a daily newspaper varies from city to city. However, the variation among prices...
The cost of a daily newspaper varies from city to city. However, the variation among prices remains steady with a standard deviation of 20¢. A study was done to test the claim that the mean cost of a daily newspaper is $1.00. Twelve costs yield a mean cost of 95¢ with a standard deviation of 18¢. Do the data support the claim at the 1% level? FILL IN THE BLANKS a. State null hypothesis in symbols: H0: µ = $1.00...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT