Explodia.com sells fireworks over the Internet. Customers access Explodia's website and select particular products, and Explodia refers the customer order to a fireworks manufacturer who fulfills the order, ships to the customer, and pays Explodia a 20% commission. Which of the following is true about Explodia?
A) Explodia is an agent in this transaction.
B) Explodia is primarily responsible for providing the product to the customer.
C) Explodia's income statement would report gross revenue and cost of sales associated with these transactions.
D) Explodia warehouses inventory.

Question

Quizplus · Accepted Answer

Explodia has the characteristics of an agent. It does not have control of the fireworks that are purchased by customers, because it doesn't have primary responsibility for delivering the product, is not vulnerable to risks associated with holding inventory, and doesn't collect payment from the customer. Rather, Explodia is an agent, with its primary performance obligation being to facilitate transactions between fireworks customers and manufacturers.

ExplodiaCom Sells Fireworks Over the Internet