Section 2: Report

Scenario: Absco, Inc., is a calendar year-end clothing manufacturer that sells exclusively to retailers. It engages in a large number of contracts with its customers. Absco signed a contract with Socks Are Us to ship 100,000 pairs of socks on December 27. The contract price is $5 per pair, with a nonrefundable payment due upon receipt of the socks. Absco immediately delivers the socks to Socks Are Us once the contract is signed by both parties, with the socks arriving on December 28. However, Socks Are Us has not remitted payments as of December 31. It is clear to Absco that it will have to offer the customer a price concession to receive any payment at all. Absco has not had extensive dealings with Socks Are Us but estimates that it will need to offer a 25% discount.

Using the Accounting Standards Codification, Section ASC 606 as a source from Revenue From Contracts With Customers (Topic 606),

• Identify whether Absco should recognize any revenue related to the transaction scenario in the current year.
  • Calculate how much.