Write an analysis of the five revenue-recognition steps. Apply the five revenue-recognition steps per ASC Topic 606 or FASB Accounting Standards Update (ASU) No. 2014-09 to Stella’s sales transaction on the next page. Before applying each step, describe the requirements of that step, and quote relevant ASC 606 sub-topics using Revenue Recognition-Brief-Roadmap-by-AICPA.pdf. Provide an explanation/justification for how you apply the requirement by referring to the relevant guideline in the standard. Tip for Step 2: You will identify the number of performance obligations in the contract and describe what they are along with why they are separate performance obligations. Step 2 is related to Steps 4 & 5. So make sure that your answers in Steps 4 and 5 are consistent with each other and with the answer in Step 2. Tip for Step 4: Show the computation of the transaction price of each performance obligation. Be sure to consider the discount. Tip for Step 5: Specify (1) how Stella should recognize revenue for each performance obligation, i.e., at a point in time (when exactly?), or over a time period (which time period?), and (2) how much of revenue should be recognized for each one. Document1 - WordSaleh AlfaheidFile Home Insert Draw Design Layout References Mailings Review View Help Grammarly Tell me what you want to doShare CommentsFindReplaceSelectEditinga CopyPasteDictateOpenGrammarlyGrammarlyNormal No Spac Heading 1 Heading 2TitleSubtitle Subtle Em...Format PainterClipboardFontParagraphStylesVoiceAutoSave OffBackground on Stella Co. and its sales transactionStella Co., a wholly-owned subsidiary of a U.S. listed company-Alpha Inc, is amanufacturer of active and passive communications equipment located in Shenzhen, China. Itsells its products to Chinese Communication Carrier (CCC) that is partially owned and operatedby the Chinese government. About half of Stella's revenues are generated through sales to theDue to the significant size and market share of the CCC, it dictates all aspects of itsrelationship with Stella. The CCC does not place formal purchase orders or provide signedcontracts prior to initiating an order with Stella. Instead, it has in place with Stella an approvedand enforceable frame agreement that identifies the rights and obligations of the parties. Althoughthe frame agreement does not specify fixed prices, they specify general payment terms that includeprobable discount on quoted price and a payment period of up to six months from product deliveryThe CCC will place an order for product by calling in a verbal order, sending a textmessage, or sending an e-mail to Stella sales representative. A price is quoted by Stella when theorder is placed. The actual price will be negotiated and specified in the final contract. The actualprice has historically been four to six percent less than the price quoted when the order was initiallylity of price discount anywhere between four andsix percent. It may take up to three months for an agreement with a fixed sales price to be signedplaced. Stella's record indicates an equal probabi("chopped" is the term used in China) by both partiesStella just introduced a new communication equipment that is of high interest to the CCCA stand-alone price of this new equipment is $450,000. A customer can also purchase a three-yearmaintenance/software-upgrade agreement for this new equipment at a price of $50,000. Becausethe CCC is such an important customer, Stella quoted the CCC a bundled price of S480,000 thatincludes the new equipment and the three-year maintenance/software-upgrade agreement. Themaintenance/software-upgrade agreement will start upon customer receipt of the equipment. TheCCC recently called and placed a purchase order for the new equipmen, and the maintenanceagreement that includes software upgrades. The quoted prices of $480,000 in this purchase orderis subiect to negotiation and discount as indicated in the prior paragraphThe CCC often demands shipment from Stella within three to 10 days after placing anorder. Stella often ships products before an agreement is chopped. The products are shipped tothe customer's warehouse. Stella requests a signed delivery confirmation document and.alsorequests that the agreement is chopped when product is received. However, the customers tend toignore Stella's requests about signed delivery confirmation and defer chopping the agreement forup to three months. The CCC has a history of paying for all purchases about two months after theagreement is chopped. Thus, payment is received by Stella an average of five months aftershipments are received by the CCC. The standard customer-payment period for Alpha, Stella'sparent, is only one to two months after shipments. Stella's other customers also follow thisstandard payment period. The CCC rarely returns products and the return rate is negligiblePage 1 of 1538 wordsEnglish (United States)+ 70%ENG 3:03 PMUS 3/6/2019Type here to search

Question

Write an analysis of the five revenue-recognition steps. Apply the five revenue-recognition steps per ASC Topic 606 or FASB Accounting Standards Update (ASU) No. 2014-09 to Stella’s sales transaction on the next page.  Before applying each step, describe the requirements of that step, and quote relevant ASC 606 sub-topics using Revenue Recognition-Brief-Roadmap-by-AICPA.pdf.  Provide an explanation/justification for how you apply the requirement by referring to the relevant guideline in the standard.  Tip for Step 2: You will identify the number of performance obligations in the contract and describe what they are along with why they are separate performance obligations. Step 2 is related to Steps 4 & 5.  So make sure that your answers in Steps 4 and 5 are consistent with each other and with the answer in Step 2. Tip for Step 4: Show the computation of the transaction price of each performance obligation.  Be sure to consider the discount. Tip for Step 5: Specify (1) how Stella should recognize revenue for each performance obligation, i.e., at a point in time (when exactly?), or over a time period (which time period?), and (2) how much of revenue should be recognized for each one. Document1 - WordSaleh AlfaheidFile Home Insert Draw Design Layout References Mailings Review View Help Grammarly Tell me what you want to doShare CommentsFindReplaceSelectEditinga CopyPasteDictateOpenGrammarlyGrammarlyNormal No Spac Heading 1 Heading 2TitleSubtitle Subtle Em...Format PainterClipboardFontParagraphStylesVoiceAutoSave OffBackground on Stella Co. and its sales transactionStella Co., a wholly-owned subsidiary of a U.S. listed company-Alpha Inc, is amanufacturer of active and passive communications equipment located in Shenzhen, China. Itsells its products to Chinese Communication Carrier (CCC) that is partially owned and operatedby the Chinese government. About half of Stella's revenues are generated through sales to theDue to the significant size and market share of the CCC, it dictates all aspects of itsrelationship with Stella. The CCC does not place formal purchase orders or provide signedcontracts prior to initiating an order with Stella. Instead, it has in place with Stella an approvedand enforceable frame agreement that identifies the rights and obligations of the parties. Althoughthe frame agreement does not specify fixed prices, they specify general payment terms that includeprobable discount on quoted price and a payment period of up to six months from product deliveryThe CCC will place an order for product by calling in a verbal order, sending a textmessage, or sending an e-mail to Stella sales representative. A price is quoted by Stella when theorder is placed. The actual price will be negotiated and specified in the final contract. The actualprice has historically been four to six percent less than the price quoted when the order was initiallylity of price discount anywhere between four andsix percent. It may take up to three months for an agreement with a fixed sales price to be signedplaced. Stella's record indicates an equal probabi(&#34;chopped&#34; is the term used in China) by both partiesStella just introduced a new communication equipment that is of high interest to the CCCA stand-alone price of this new equipment is $450,000. A customer can also purchase a three-yearmaintenance/software-upgrade agreement for this new equipment at a price of $50,000. Becausethe CCC is such an important customer, Stella quoted the CCC a bundled price of S480,000 thatincludes the new equipment and the three-year maintenance/software-upgrade agreement. Themaintenance/software-upgrade agreement will start upon customer receipt of the equipment. TheCCC recently called and placed a purchase order for the new equipmen, and the maintenanceagreement that includes software upgrades. The quoted prices of $480,000 in this purchase orderis subiect to negotiation and discount as indicated in the prior paragraphThe CCC often demands shipment from Stella within three to 10 days after placing anorder. Stella often ships products before an agreement is chopped. The products are shipped tothe customer's warehouse. Stella requests a signed delivery confirmation document and.alsorequests that the agreement is chopped when product is received. However, the customers tend toignore Stella's requests about signed delivery confirmation and defer chopping the agreement forup to three months. The CCC has a history of paying for all purchases about two months after theagreement is chopped. Thus, payment is received by Stella an average of five months aftershipments are received by the CCC. The standard customer-payment period for Alpha, Stella'sparent, is only one to two months after shipments. Stella's other customers also follow thisstandard payment period. The CCC rarely returns products and the return rate is negligiblePage 1 of 1538 wordsEnglish (United States)+ 70%ENG 3:03 PMUS 3/6/2019Type here to search

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