Apple Case Study Essay
A. In your own words, define “revenues.” Explain how revenues are different from “gains.”
Revenues are the monies that are brought in as a result of the business’ core functions in their respective industry. Revenues are different from gains in that revenues can be accounted for, while still taking a loss in the overall profitability. If an item were to be sold below cost, it brings revenue (selling price), but was sold at a loss.
B. Describe what it means for a business to “recognize revenues.” What specific amounts and financial statements are affected by the process of revenue recognition? Describe the revenue recognition criteria outline in the FASB’s statement of Concepts No. 5.
A business can decide at …show more content…
Revenues are recognized based on the gross amount billed to third party re-sellers. If the speakers were drop-shipped from Logitech to the customer, the liability and risk fall solely on the other retailer instead of Apple, and therefor revenues should be recognized at the point of sale at the Apple store.
H. Consider the following hypothetical sales scenario: A large community college buys and takes delivery of 50 iMac computers from a local Apple store. The invoiced price is $2800 per unit and includes hardware, software essential to the functionality of the hardware, third-party software including MS Office for Mac and Adobe Creative Suite, and two years of tech service and support. Apple uses vendor-specific objective evidence to determine unit prices of $2500 and $300 for hardware and the essential software, respectively. The third party software typically retails for $500 with equivalent service and support being $100 per year. The customer can opt to purchase for the transaction at the time the customer takes delivery of the computers. Indicate how Apple should record gross revenue for the transaction at the time the customer takes delivery of the computers. Your…