Revenue Recognition

In September 2018, YPL shipped a container of Yoga equipment to Sport Inc (SI). To make the terms of the sale attractive and to encourage future purchases, YPL structured this deal so that no payment is required until the inventory is sold to SI's customers. For this transaction, YPL recorded a sale of $243,000 and reduced inventory by $188,000. As of today, SI has sold 20% of the truckload.

Sales to Happy Yoga

Sales of $450,000 were made to another company, Happy Yoga (HY). Just as it had with HY, YPL sweetened the deal with HY by offering a six-month money-back guarantee for the full $500,000. Most of the sales to HY were made in November, so the return period will not have expired by YPL's year end (December 31). YPL has recognized all revenue for the above transaction.

Required

Issues Analysis