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Case 16-2 The Cable Guvs CoAx (the "Company"), a publicly traded company, manufactures and sells coaxial and fiber-optical cable. CoAx is contemplating two separate transactions for which it is evaluating the appropriate revenue recognition Transaction 1 CableCo, a customer of CoAx, has entered into a binding written agreement to purchase 1,000 feet of 18 American wire gage (AWG) coaxial cable for $3 per foot. Because CableCo is constructing a new warehouse, it is unable to take delivery of the cable and has requested in writing that CoAx store the cable in its warehouse until construction of CableCo's warehouse is completed. CableCo's warehouse will be completed three months from the time of purchase, at which time CableCo is required to take delivery of the cable. CoAx stores 18 AWG coaxial cable in 10,000-foot spools (spools of cable are considered finished goods and ready for shipment). CoAx will not physically segregate the cable that CableCo will purchase; rather, the Company will designate the quantity in its inventory tracking system as "sold," thereby preventing the use of the cable to fulfill other customer orders. In other words, CoAx will "virtually" segregate the inventory CoAx and its auditors have concluded the following with respect to the arrangement with CableCo