Posted On: 01/11/2016 3:01:53 AM
Post# of 96900
Re: NanaBelle2015 #47877
Nana, you are right. It is very confusing. What happens is this:
NTEK sells you a 99/99 promo package. They collect cash - $99 (and for right now we will forget the credit card fees that will be deducted, although in the real world they would have to be considered and accounted for) and agree to let you watch 99 movies (of the $4.99 type). They account for this by recording receipt of the cash (an asset) and set up a liability for the $99. Now, unless they have contract restrictions with the content providers (Paramount, etc.) they can spend the cash at their discretion. If you then watch 7 movies this month we (NTEK) will record $7 income and reduce our original liability by $7. However, we will have to record a liability to the content provider and pay it as per our contract. And there may still be other things to consider. If you need me to keep going, let me know.
NTEK sells you a 99/99 promo package. They collect cash - $99 (and for right now we will forget the credit card fees that will be deducted, although in the real world they would have to be considered and accounted for) and agree to let you watch 99 movies (of the $4.99 type). They account for this by recording receipt of the cash (an asset) and set up a liability for the $99. Now, unless they have contract restrictions with the content providers (Paramount, etc.) they can spend the cash at their discretion. If you then watch 7 movies this month we (NTEK) will record $7 income and reduce our original liability by $7. However, we will have to record a liability to the content provider and pay it as per our contract. And there may still be other things to consider. If you need me to keep going, let me know.
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