FASB ACCOUNTINGSTANDARDSCODIFICATIONCASE#2The birth of the Internet in the 1990s led to the creation of a new industry of online retailers such as Amazon, Overstock.com, and PC Mall. Many of these companies often act as intermediaries between the manufacturer and the customer without ever taking possession of the merchandise sold. Revenue recognition for this type of transaction has been controversial. Consider the following situation: Overstock.com sells a product for $200 that it purchased for $150. The company’s profit on the transaction is clearly $50. However, there are two possible ways to account for the transaction: 1) recognize $200 of revenue and $150 of cost of goods sold (gross method), or 2) recognize only the $50 in gross profit as commission revenue (net method). Answer the following questions about net and gross revenue recognition. When completing your answers, you should consider the following: •All references to the FASB Accounting Standards Codification must be properly cited.
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