An entity is an agent if its performance obligation is to arrange for another party to provide the good or service. The agent does not control the good or service before it is transferred to the customer. Here, TravelSite.com arranges the booking but the hotel provides the service. Therefore, TravelSite.com should recognize revenue in the net amount it expects to retain, which is its commission. Revenue = $500 * 12% = $60.

According to ASC 606, one of the criteria for identifying a contract with a customer is that the collectibility of substantially all of the consideration is probable. Since collection is not probable, a contract does not exist for accounting purposes. No revenue should be recognized until cash is received and the performance obligation has been satisfied, or the contract has been terminated and the consideration received is nonrefundable.

The transaction price includes fixed consideration plus an estimate of variable consideration. Using the expected value method, the variable consideration is calculated as the sum of probability-weighted amounts. The expected bonus is (70% * $200,000) + (30% * $0) = $140,000. The total transaction price is the fixed price plus the expected bonus: $5,000,000 + $140,000 = $5,140,000.

The transaction price should be allocated to each performance obligation based on their relative standalone selling prices. The total standalone selling price is $800 (smartphone) + $600 (smartwatch) = $1,400. The allocation percentage for the smartphone is $800 / $1,400 = 57.14%. The revenue allocated to the smartphone is $1,050 * ($800 / $1,400) = $600.

First, determine the total transaction price: 24 months * $70/month = $1,680. Second, determine the total standalone selling prices: $600 (phone) + (24 months * $50/month) = $600 + $1,200 = $1,800. Third, allocate the transaction price based on relative standalone values. The allocation to the smartphone is ($600 / $1,800) * $1,680 = $560. This amount is recognized as revenue when control of the phone transfers to the customer at inception.

Incremental costs of obtaining a contract, such as sales commissions, should be capitalized as an asset and amortized on a systematic basis consistent with the transfer of services to the customer. The $10,000 cost should be amortized over the 4-year (48-month) contract term. For Year 1, the amortization covers 3 months (October, November, December). Amortization expense = ($10,000 / 48 months) * 3 months = $625.

Revenue should be recognized over time if any of the three criteria in ASC 606 are met. In this case, two criteria are met: (1) The entity's performance creates an asset that the customer controls as it is created (implied by progress payments and customization), and (2) The asset created has no alternative use to the entity, and the entity has an enforceable right to payment for performance completed to date. Therefore, revenue should be recognized over the production period, typically using a cost-to-cost or other input/output method.

ASC 606 includes a constraint on variable consideration: an entity should only include variable consideration in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is resolved. Given the high probability of a significant revenue reversal, the variable consideration is constrained, and none of it should be included in the transaction price until the uncertainty is resolved.

A warranty is a separate performance obligation (a service-type warranty) if the customer has the option to purchase it separately. The two-year extended warranty is sold separately and provides a service beyond assuring the product complies with agreed-upon specifications. The one-year standard warranty is an assurance-type warranty, which is not a separate performance obligation but rather a guarantee of product quality, and its cost is accrued as a warranty expense.

When a right of return exists, an entity should recognize revenue for the consideration it expects to be entitled to. The transaction price should be reduced by the expected returns. Net revenue = Total Sales * (1 - Expected Return Rate) = $50,000 * (1 - 0.04) = $50,000 * 0.96 = $48,000. A refund liability for $2,000 and an asset for the right to recover returned goods would also be recognized.