Question

Aria Perfume, Inc., sold 2,520 boxes of white musk soap during January of 2018 at the price of $60 per box. The company offers a full refund to unsatisfied customers for any product returned within 30 days from the date of purchase. Based on historical experience, Aria expects that 4% of sales will be returned. How many performance obligations are there in each sale of a box of soap? How much revenue should Aria recognize in January?

Answer 1

Answer:

One performance obligation

Revenue -  $145,152

Explanation:

There is only one performance obligation is there in each sale of a box of soap if the customer is not fully satisfied with its products so he is eligible to take a full refund.

The computation of the revenue recognized is shown below:

= Number of boxes sold × price per box - sales returned percentage × sales revenue

= 2,520 boxes × $60 - 4% × 2,520 boxes × $60

= $151,200 - $151,200 × 4%

= $151,200 - $6,048

= $145,152