Sherman Painting Shop sells a tailor-made and new painting to a customer for $2,420. The cost of the painting to Sherman is $1,600 and the cash selling price of the painting is $2,000, which represents the amount that the customer would pay upon delivery for the same painting sold under otherwise identical terms and conditions as at contract inception. Sherman offers a favorable term that the consideration can be payable 24 months after delivery and Sherman also allows a return of the painting within 90 days.

Discuss how Sherman should account for the contract with the customer?

e.g. five step of Revenue Recognition

(Identify the contract(s) with a customer, Determine the transaction price, Identify the performance obligations in the contract, Allocate the transaction price to performance obligations, Recognize revenue as (or when) performance obligations are satisfied)