Cascades Enterprises ordered 4,000 brackets from McKey and Company on December 1, 2011, for a contracted price of $40,000. McKey complete manufacturing the brackets on January 17 of the next year and delivered them to Cascades on February 9. McKey received a check for $40,000 from Cascades on March 14.
a. Assume that McKey and Company prepares monthly income statements. In which month should McKey recognize the $40.000 revenue from the sale?
b. Justify your answer m (a in terms of the four criteria of revenue recognition.
c. Are there conditions under which the venue could be recognized in a different month than the month you chose in (a)?
d. Provide several reasons why McKey’s management might he interested in the timing of the recognition of revenue.