Case #2: Customer Discounts

Eureka Corp. is a public company and offers its customers payment terms of 1/10, n/30, where purchasers making payment within 10 days of product receipt will receive a discount of 1% off the purchase price, or must pay the full balance due within 30 days. Eureka has just received payment from a new customer who paid within the 10-day window and is thus entitled to the 1% discount. This discount will not result in a loss to Eureka on the sale of the product. Eureka needs your help to determine when the 1% sales incentive should be recognized, and how it should be recorded as a reduction in revenue, or as a cost of sales?

Required:

1. Find guidance from the Codification, explain when and how Eureka should account for the sales incentive. Use only currently effective guidance (do not use pending content). Your response should discuss the guidance and its applicability to this situation, and can include excerpts from the guidance as helpful in supporting your response.
2. Explain how you located the relevant guidance, including the search method used, and which section you searched within the appropriate topic.