AuctionCo.com sells used products collected from different suppliers. Products are shipped to the customer by the original owners. Assume a customer ordered a used bicycle through AuctionCo.com for $30.
Required:
1. Assume AuctionCo.com purchases this used bicycle for $20 from a supplier and takes control before the sale. Under this assumption, how much revenue would the company recognize? Explain your revenue recognition.
2. Assume AuctionCo.com does not take control of this used bicycle before the sale. AuctionCo.com receives $30 from the customer and pays $20 to the supplier. Under this assumption, how much revenue would the company recognize?. Explain your revenue recognition.