Assume that Amazon.com sells the MacBook Pro, a computer produced by Apple, for a retail price of $1,500.

Assume that Amazon.com sells the MacBook Pro, a computer produced by Apple, for a retail price of $1,500. Amazon arranges its operations such that customers receive products directly from Apple Stores rather than Amazon. Customers purchase from Amazon using credit cards, and Amazon forwards cash to Apple equal to the retail price minus a $150 commission that Amazon keeps. In this arrangement, how much revenue will Amazon recognize for the sale of one MacBook Pro?

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Expert Solution

Amazon should recognize revenue of $150 as entry on sale would be

Customer Dr	1,500.00
To Accounts Payable (Apple)		1,350.00
To Commission Income or Revenue		150.00

Principal or agent:

The “A”.com recognized revenue is $150. In this case, “A”.com acts as an agent, because it does not have primary responsibility in delivering of goods or service. The only risk is to hold the goods and services. Hence, “A”.com revenue amount is equal to commission it receives.

Amazon should recognize revenue of $150 as entry on sale would be:

Junaid answered 2 years ago

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