Question

Disclosure Note 2 indicates that “Commissions earned on sales generated by leased departments are included within sales and were $44 million . . . in 2017.” Do you think it likely that Target is accounting for those sales as a principal or an agent? Explain.

Answer 1

Solution:

The Target is accounting for those sales as a Principal.

Explanation:

1) First we have to know about leased departments. Leased Departments is a department where a part of retail store will be rented to outside party.

2) Retail Store owners who leased the department will get revenues in the form of Percentage of revenue of leased departments.

3) In this question, Target has earned commission on sales generated by leased departments and included within sales.

4) As target has earned revenue from leased department. So, target is accounting for those sales as a Principal.