E 5-7 Spicerland Intermediate Accounting
A New York City daily newspaper called “Manhattan Today” charges an annual subscription fee of $135. Customers prepay their subscriptions and receive 260 issues over the year. To attract more subscribers, the company offered new subscribers the ability to pay $130 for an annual subscription that also would include a coupon to receive a 40% discount on a one-hour ride through Central Park in a horse-drawn carriage. The list price of a carriage ride is $125 per hour. The company estimates that approximately 30% of the coupons will be redeemed.
1.How much revenue should Manhattan Today recognize upon receipt of the $130 subscription price?
I have already found the answer to this question, and it is as follows:
Revenue : 0
2. How many performance obligations exist in this contract?
I have already found the answer to this question, and it is as follows:
number of performance obligations: 2
3. Prepare the journal entry to recognize sale of 10 new subscriptions, clearly identifying the revenue or deferred revenue associated with each performance obligation. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
I have solved the following thus far, but I am not able to determine the amounts for each. Please advise how the amounts are determined.
1.Cash $1300
deferred revenue - subscription?
deferred revenue - discount coupon?