In the toy manufacturing industry, it is common to allow customers (retail stores) to return unsold toys within a specified period of time. Suppose that a toy manufacturer’s year end is December 31 and that the majority of its products are shipped to customers during the last quarter of the year (October to December) in anticipation of the holiday season.
Required:
Is it appropriate for the company to recognize revenue upon shipment of the product? Refer to revenue recognition criteria to support your answer.