[Solved] The Following Disclosure Note Appeared in a Recent Annual Report

Question 327

The following disclosure note appeared in a recent annual report to stockholders of Dell Inc. ,the computer manufacturer: "Net revenue includes sales of hardware,software and peripherals,and services (including extended service contracts and professional services).These products and services are sold either separately or as part of a multiple-element arrangement.Dell allocates fees from multiple-element arrangements to the elements based on the relative fair value of each element,which is generally based on the relative list price of each element.For sales of extended warranties with a separate contract price,Dell defers revenue equal to the separately stated price.Revenue associated with undelivered elements is deferred and recorded when delivery occurs.Product revenue is recognized,net of an allowance for estimated returns,when both title and risk of loss transfer to the customer,provided that no significant obligations remain.Revenue from extended warranty and service contracts,for which Dell is obligated to perform,is recorded as deferred revenue and subsequently recognized over the term of the contract or when the service is completed.Revenue from sales of third-party extended warranty and service contracts,for which Dell is not obligated to perform,is recognized on a net basis at the time of sale."
Briefly explain why Dell Computer recognizes revenue at different times for (a)product sales, (b)extended warranty and service contracts for which Dell is obligated to perform,and (c)extended warranty and service contracts for which a third party is obligated to perform.

10+ million students use Quizplus to study and prepare for their homework, quizzes and exams through 20m+ questions in 300k quizzes.


Explore our library and get Accounting Homework Help with various study sets and a huge amount of quizzes and questions


Study sets





Upload material to get free access

Upload Now Upload Now
Upload Now

Invite a friend and get free access

Upload NowInvite a friend
Invite a friend

Subscribe and get an instant access

See our plansSee our plans
See our plans