S3-4. (Learning Objective 2: Applying the revenue and expense recognition principles) A large auto manufacturer sells large

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S3-4. (Learning Objective 2: Applying the revenue and expense recognition principles) A large auto manufacturer sells large fleets of vehicles to auto rental companies, such as Lewis and Clark. Suppose Lewis is negotiating with the auto manufacturer to purchase 80 vehicles.

Write a short paragraph to explain to the auto manufacturer when the company should, and should not, record this sales revenue and the related expense for cost of goods sold. Mention the accounting principles that provide the basis for your explanation.

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