A customer pays $1,000 in advance for a service agreement. What are the financial statement effects of this transaction if

(a) revenue is recognized at receipt of cash, and

(b) revenue is recognized at delivery of the product? What forecasts, if any, do you have to make to complete the recording of this transaction? What factors would determine which of these two approaches is appropriate? As a financial analyst, what questions would you raise with the firm’s CFO?

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