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18 July, 07:09

Aria Perfume, Inc., sold 2,520 boxes of white musk soap during January of 2018 at the price of $60 per box. The company offers a full refund to unsatisfied customers for any product returned within 30 days from the date of purchase. Based on historical experience, Aria expects that 4% of sales will be returned. How many performance obligations are there in each sale of a box of soap? How much revenue should Aria recognize in January?

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  1. 18 July, 11:09
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    One performance obligation

    Revenue - $145,152

    Explanation:

    There is only one performance obligation is there in each sale of a box of soap if the customer is not fully satisfied with its products so he is eligible to take a full refund.

    The computation of the revenue recognized is shown below:

    = Number of boxes sold * price per box - sales returned percentage * sales revenue

    = 2,520 boxes * $60 - 4% * 2,520 boxes * $60

    = $151,200 - $151,200 * 4%

    = $151,200 - $6,048

    = $145,152
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