Several situations in which the timing of revenue is in doubt are listed below. a. An appliance
Question:
Several situations in which the timing of revenue is in doubt are listed below.
a. An appliance manufacturer sent out a truckload of dishwashers FOB destination in late January; they arrived February 2 and were paid for in March. Monthly income statements are prepared.
b. A magazine publisher sold two-year subscriptions for a monthly publication.
c. An auto dealer sold five-year service contracts for cash at the time of the auto sale.
d. A home decorating center sold wallpaper with a 60-day right to return of up to 25% of an order. For the past several years, returns have been fairly consistent, with one in 10 customers returning some paper; the average return is 1.2 rolls.
e. A bridge construction firm is involved in only one project at a time; the average project takes three years. The contract price is firm and definitely collectible; total costs of the project can be estimated.
Required
First, explain what events generally must occur before any revenue is recognized. Then discuss when each of the above situations should result in revenue recognition, and why.
A dealer in the securities market is an individual or firm who stands ready and willing to buy a security for its own account (at its bid price) or sell from its own account (at its ask price). A dealer seeks to profit from the spread between the...
Step by Step Answer:
Financial Accounting Information For Decisions
ISBN: 978-0324672701
6th Edition
Authors: Robert w Ingram, Thomas L Albright