There are five revenue recognition? criteria. 1.Identify the contract with the customer. 2.Identify the performance obligations....

There are five revenue recognition? criteria.

1.Identify the contract with the customer.

2.Identify the performance obligations.

3.Determine the transaction price.

4.Allocate the transaction price to performance obligations.

5.Recognize revenue in accordance with performance.

There are some situations.a.
a.An apartment owner receives a deposit of? $1200 equal to one? month's rent.
b.An insurance company receives annual premiums for fire insurance on June 25 for coverage beginning July 1.
c.A city transit authority issues? 200,000 monthly passes at? $80 each for sale at various retailers. Retailers act as consignees for these passes.
d.A city transit authority sells? 50,000 monthly passes at? $80 each to transit riders at its own retail? offices/stores.e.
e.A provincial lottery corporation delivers 10 million? scratch-and-win cards to retailers. The cards retail for? $2 and generate a commission of? $0.20 per card for the retailer. The retailer can return unsold cards to the lottery corporation.

Just identify which revenue recognition? criterion/criteria is/are NOT met at the point of? sale, preventing the recognition of revenue at that time

Expert Solution

1. It is not probable that the economic benefits (the value of the deposit) will flow to the entity. performance obligations not met.

2. Performance Obligation is Stage of Completion. So the revenue will be recognized over the period of time. Allocate the transaction price to performance obligations

3. The transit authority has not transferred to the buyer the risks and rewards of ownership. Performance Obligation not met.

4. Revenue should be recognized according to the stage of completion. The period for which the passes are valid has not elapsed. Allocate the transaction price to performance obligations not available.

5. The lottery corporation has not transferred to the buyer the risks and rewards of ownership. Performance Obligation not met.

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