Task 1: Revenue Recognition
WGU
D252
May 9, 2022
, Revenue Recognition
PartA
In the analysis case, KTSB agreed to sell Ramesses II 300 E model computers by September
1% The agreement entails several accounting issues, which include:
The time of transfer of ownership between KTSB and Ramesses II. In this case one should
identify whether the performance obligation in the contract is satisfied at a point in time or
over time.
b) Accounting for the agreement that Ramesses II will not allow any discounts on its customers,
but would return any unsold computers to the KTSB in 90 days of delivery. This case
involves the accounting for a refund liability. A refund liability entails accounting for a full or
partial refund of the consideration paid by the customer.
) Accounting for the manufacturer's coupon entitles customers to $100 off model E with 90
days expiration date. The accounting issue here is accounting for non-cash consideration
where customers are allowed to pay in other means other than money.
d) Accounting for the agreement by Ramesses II to sell KTSB's gift cards and other retailers'
gift cards. In the agreement, KTSB would pay Ramesses II 3% of the value of the gift cards
sold. Here the management should consider accounting for promises in contracts with
customers because, KTSB has promised to pay 3% on the sales of gift cards.
e) Accounting for the customer’s warranty claims by Ramesses II accepted in its warehouse on
behalf of KTSB within the first year of sale. In this agreement, KTSB instructed Ramesses IT
to either refund the customers or provide them with another E model computer. The
accounting issue here is accounting of warranty claims from the customers during the
stipulated time.
WGU
D252
May 9, 2022
, Revenue Recognition
PartA
In the analysis case, KTSB agreed to sell Ramesses II 300 E model computers by September
1% The agreement entails several accounting issues, which include:
The time of transfer of ownership between KTSB and Ramesses II. In this case one should
identify whether the performance obligation in the contract is satisfied at a point in time or
over time.
b) Accounting for the agreement that Ramesses II will not allow any discounts on its customers,
but would return any unsold computers to the KTSB in 90 days of delivery. This case
involves the accounting for a refund liability. A refund liability entails accounting for a full or
partial refund of the consideration paid by the customer.
) Accounting for the manufacturer's coupon entitles customers to $100 off model E with 90
days expiration date. The accounting issue here is accounting for non-cash consideration
where customers are allowed to pay in other means other than money.
d) Accounting for the agreement by Ramesses II to sell KTSB's gift cards and other retailers'
gift cards. In the agreement, KTSB would pay Ramesses II 3% of the value of the gift cards
sold. Here the management should consider accounting for promises in contracts with
customers because, KTSB has promised to pay 3% on the sales of gift cards.
e) Accounting for the customer’s warranty claims by Ramesses II accepted in its warehouse on
behalf of KTSB within the first year of sale. In this agreement, KTSB instructed Ramesses IT
to either refund the customers or provide them with another E model computer. The
accounting issue here is accounting of warranty claims from the customers during the
stipulated time.
