Question
Is this is a revenue recognition violation? Should jeffrey record the sale on december 31, 2004? a sale Jeffrey booked in 2004 and shipped FOB
Is this is a revenue recognition violation? Should jeffrey record the sale on december 31, 2004?
a sale Jeffrey booked in 2004 and shipped FOB shipping point on December 31, 2004, which arrived at the customers warehouse on January 5, 2005. If not for this transaction, the December 31, 2004 ending inventory would have been $20,000 higher and sales $38,000 lower in 2004. Mabel indicated that the goods were finished and boxed by December 26, 2004, but were not shipped on that day due to confusion as to the exact delivery location. The confusion was not cleared up until December 30th. At that point, the customer decided she would rather have it delivered after January 1, 2005, because she had arranged for a large party to be held in the inventory receiving area on December 31, 2004.
For reasons unknown to Mabel, Jeffrey had hired an independent shipping company to make the delivery and had insured the cargo during transit (Greys fleet insurance routinely covered these deliveries). It was a half-day trip to the customers warehouse, but Jeffrey loaded the delivery truck with the merchandise on December 31, 2004, and the driver drove the merchandise approximately half-way to the customers warehouse. Mabel told Henry that Jeffrey paid the driver to stay in a four-star hotel for two nights until January 2, 2005, when the delivery was made in the early morning. The driver had quickly volunteered for the trip, since he was paid time and a half and given a generous meal allowance. After all, it was not every day that he got to stay in a fancy hotel and baby-sit a truckload of wall hangings.
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