Question

Aria Perfume, Inc., sold 3,820 boxes of white musk soap during January of 2016 at the price of $120 per box. The company offers a full refund for any product returned within 30 days from the date of purchase. Based on historical experience, Aria expects that 2% of sales will be returned.

How many performance obligations are in the contract?

How much January Revenue?

Answer 1

Answer:

(A) 2 obligations

(B) Sales revenue for January: 449,232 dollars

Accounts receivales   449.232‬ debit

          Sales revenues                  449.232‬ credit

Explanation:

(A) there is two performance obligations

one is two deliver the musk soap

and the other is the warranty on the soap

nominal: 3,820 musk soap x $ 120 per unit = $ 458,400

less warranty of 2% 458,400 (1 - 0.02) = $449,232‬