This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: on the washing machine + a partial discount on the warranty Revenue Recognition for Multiple Deliverables (bundled products) Normally, the washing machine price is 500/599 = 83.5% of the total bundle fair value Since Best Buy sold this bundle for $510, the washing machine portion of the sale is: 83.5% x $510 = $426 Instead of recognizing $500 of revenue now (for the washer), Best Buy can only recognize $426 of revenue now The remaining $84 of revenue gets booked as a liability (deferred revenue) and is earned as time elapses over the next 2 years Normally, the warranty price is 99/599 = 16.5% of the total bundle fair value Therefore, the warranty portion of the sale is: 16.5% x $510 = $84 What type of behavior does this treatment prevent managers from doing? ACCT 3220/Sep 15, 2010 2...
View Full Document