New York City daily newspaper called “Manhattan Today” charges an annual subscri

Question

New York City daily newspaper called “Manhattan Today” charges an annual subscription fee of $162. Customers prepay their subscriptions and receive 290 issues over the year. To attract more subscribers, the company offered new subscribers the ability to pay $160 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 $150 per hour. The company estimates that approximately 30% of the coupons will be redeemed. Required: 1. How much revenue should Manhattan Today recognize upon receipt of the $160 subscription price?

Explanation / Answer

As per the principle of revenue recognition, the recognition of revenue should be postponed until there is virtual certainity about the realisation of revenue. Considering in the present it is not almost certain that 30% of the coupon will be redeemed so no revenue is recognised in this respect.

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