WGU D252 TASK 1| REVENUE RECOGNITION
ANALYSIS FOR KTSB’S AGREEMENT WITH
RAMESSES II | LATEST UPDATE WITH COMPLETE
SOLUTIONS
Task 1 Revenue Recognition
Revenue Recognition Analysis for KTSB’s
Agreement with Ramesses II
Prepared by: Renajla Rizvanovic
, Part A. Four Agreement Issues That Potentially Impact Revenue Recognition
(and Why)
Issue 1. Right of Return for Unsold Product (90-day return window).
The agreement allows Ramesses II to return any unsold Model E units
within 90 days of purchase. This creates variable consideration and requires
KTSB to estimate expected returns, recognize a refund liability, and record
a return asset; revenue must be recognized net of expected returns. (KTSB
and Ramesses II Agreement)
Issue 2. Customer acceptance rights and timing of control transfer.
The agreement states that title transfers at delivery (August 23) while
Ramesses II keeps the right to accept the computers by September 1.
Substantive acceptance rights can delay the transfer of control and revenue
recognition until acceptance or until certain criteria are met. (KTSB and
Ramesses II Agreement)
Issue 3. $100 manufacturer coupon redeemable at KTSB and at the
point of sale at Ramesses II (with reimbursement).
Reimbursement to Ramesses II for redeemed coupons counts as
consideration payable to a customer and lowers the transaction price.
Expected redemptions should be estimated, limited, and liability should be
recognized. (KTSB and Ramesses II Agreement)
Issue 4. 3% commission for selling KTSB gift cards at kiosks
(industry standard 2.5%).
If the kiosk distribution service is distinct and 3% is fair value, recognize it
as a selling expense. Any amount above fair value is payable to a customer
and reduces revenue on sales to Ramesses II. (KTSB and Ramesses II
Agreement)
ANALYSIS FOR KTSB’S AGREEMENT WITH
RAMESSES II | LATEST UPDATE WITH COMPLETE
SOLUTIONS
Task 1 Revenue Recognition
Revenue Recognition Analysis for KTSB’s
Agreement with Ramesses II
Prepared by: Renajla Rizvanovic
, Part A. Four Agreement Issues That Potentially Impact Revenue Recognition
(and Why)
Issue 1. Right of Return for Unsold Product (90-day return window).
The agreement allows Ramesses II to return any unsold Model E units
within 90 days of purchase. This creates variable consideration and requires
KTSB to estimate expected returns, recognize a refund liability, and record
a return asset; revenue must be recognized net of expected returns. (KTSB
and Ramesses II Agreement)
Issue 2. Customer acceptance rights and timing of control transfer.
The agreement states that title transfers at delivery (August 23) while
Ramesses II keeps the right to accept the computers by September 1.
Substantive acceptance rights can delay the transfer of control and revenue
recognition until acceptance or until certain criteria are met. (KTSB and
Ramesses II Agreement)
Issue 3. $100 manufacturer coupon redeemable at KTSB and at the
point of sale at Ramesses II (with reimbursement).
Reimbursement to Ramesses II for redeemed coupons counts as
consideration payable to a customer and lowers the transaction price.
Expected redemptions should be estimated, limited, and liability should be
recognized. (KTSB and Ramesses II Agreement)
Issue 4. 3% commission for selling KTSB gift cards at kiosks
(industry standard 2.5%).
If the kiosk distribution service is distinct and 3% is fair value, recognize it
as a selling expense. Any amount above fair value is payable to a customer
and reduces revenue on sales to Ramesses II. (KTSB and Ramesses II
Agreement)
