Answer:
Manhattan Today should recognize $410 for the subscription revenue.
There are two performance obligations in this contract:
- Annual Newspaper Subscription
- Coupon for a one-hour horse-drawn carriage ride through Central Park
Date: [Date of the transaction]
Debit: Cash (11 x $410) = $4,510
Credit: Subscription Revenue (11 x $410) = $4,510
Debit: Deferred Revenue - Carriage Ride Coupon (11 x 30% x $72) = $237.60
Credit: Carriage Ride Revenue (11 x 30% x $72) = $237.60
Step-by-step explanation:
The corrected deferred revenue for the carriage ride coupon is calculated as follows:
11 (number of subscriptions) x 30% (estimated redemption rate) x $72 (estimated value of the coupon) = $237.60.
So the journal entry should include a debit to Deferred Revenue - Carriage Ride Coupon for $237.60 and a credit to Carriage Ride Revenue for $237.60.
Step-by-step explanation:
To answer your questions, let's break down the information provided.
How much revenue should Manhattan Today recognize upon receipt of the $410 subscription price?
To calculate the revenue Manhattan Today should recognize upon receipt of the $410 subscription price, we need to consider the subscription and the coupon as separate performance obligations.
a) Subscription Revenue:
The annual subscription fee is $432, but the new subscribers paid $410. Therefore, Manhattan Today should recognize the subscription revenue as the amount received for the subscription, which is $410.
b) Carriage Ride Coupon:
The coupon for the carriage ride represents a separate performance obligation. The list price of a carriage ride is $400 per hour, and the coupon offers a 40% discount. So, the discounted price of the carriage ride would be 60% of $400, which is $240.
However, the company estimates that approximately 30% of the coupons will be redeemed. Therefore, Manhattan Today should only recognize the estimated portion of the revenue related to the coupon that is expected to be redeemed. Since 30% of the coupons will be redeemed, the revenue recognized for the coupon would be 30% of $240, which is $72.
In summary, Manhattan Today should recognize $410 for the subscription revenue and $72 for the expected redemption of the carriage ride coupon, resulting in a total revenue recognition of $482.
How many performance obligations exist in this contract?
In this contract, there are two performance obligations:
a) Annual Newspaper Subscription
b) Coupon for a one-hour horse-drawn carriage ride through Central Park
Prepare the journal entry to recognize the sale of 11 new subscriptions, clearly identifying the revenue or deferred revenue associated with each performance obligation.
Assuming all 11 new subscriptions are sold at the discounted price:
Journal Entry:
Date: [Date of the transaction]
Debit: Cash (11 x $410) = $4,510
Credit: Subscription Revenue (11 x $410) = $4,510
Debit: Deferred Revenue - Carriage Ride Coupon (11 x $72) = $792
Credit: Carriage Ride Revenue (11 x $72) = $792
The journal entry records the cash received from the sale of subscriptions and recognizes the associated subscription revenue. It also records the estimated redemption value of the carriage ride coupon as deferred revenue and recognizes the corresponding carriage ride revenue.
Note: The journal entry assumes that all 11 subscribers purchased the discounted subscription, and therefore, the estimated redemption of the carriage ride coupons is based on the total number of subscriptions sold.
I really do hope this helps, I'm going off of low context. Apologies!