Principal or agent
Response to the following problem:
AuctionCo.com sells used products collected from different suppliers. Assume a customer purchases a used bicycle through AuctionCo.com for $300. AuctionCo.com agrees to pay the supplier $200 for the bicycle. The bicycle will be shipped to the customer by the original bicycle owner.
Required:
1. Assume AuctionCo.com takes control of this used bicycle before the sale and pays $200 to the supplier. Under this assumption, how much revenue would AuctionCo.com recognize at the time of the sale to the customer?
2. Assume AuctionCo.com never takes control of this used bicycle before the sale. Instead, the bicycle is shipped directly to the customer by the original bicycle owner, and then AuctionCo.com pays $200 to the supplier. Under this assumption, how much revenue would AuctionCo.com recognize at the time of the sale to the customer?
3. Assume AuctionCo.com promises to pay $200 to the supplier regardless of whether the bicycle is sold, but the bicycle will continue to be shipped directly from the supplier to the customer. Under this assumption, how much revenue would Auction.com recognize at the time of the sale to the customer?