1. Gamebox, a seller of video-gaming systems, games and online gaming subscripti

Question

1. Gamebox, a seller of video-gaming systems, games and online gaming subscriptions, recently made available a coupon that allows its gaming subscription members to extend their subscriptions by three months at no charge. Subscribers need only to login to the website using their user name and password and provide the coupon code. Because this contract modification (from 12 months to 15 months) does not add distinct goods or services from the original contract, Gamebox need only make a cumulative catch-up adjustment.

Treu or False

3.GAAP prior to ASC Topic 606 for revenue recognition specifies that for a seller to record revenue at time of sale when right of return exists the following conditions must be met except:

a. The buyer’s obligation to the seller does not change in the event of theft or physical destruction or damage of the product.

b. The buyer has paid the seller, or the buyer is obligated to pay the seller and the obligation is not contingent on resale of the product.

c. The buyer is a special purpose entity established by the seller for the sole purpose of buying and reselling the seller’s product.

d. The seller's price to the buyer is substantially fixed or determinable at thedate of sale.

Explanation / Answer

Ans)

1) True

2) Option (c) The buyer is a special purpose entity established by the seller for the sole purpose of buying and reselling the seller’s product

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