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Your firm sells industrial equipment and recognizes revenue in accordance with GAAP. The December 31, 2022, year end is quickly approaching, and your commission
Your firm sells industrial equipment and recognizes revenue in accordance with GAAP. The December 31, 2022, year end is quickly approaching, and your commission is computed at a rate equal to 10% of sales above an annual floor amount which you have already achieved. Your best customer, a strong firm with excellent credit and no payment problems, just released a purchase order for the $4.5 million of equipment you previously quoted. You feel since you did all the work in 2022, the sale should be included in your 2022 commission computation. You planned to ship the goods on December 31, 2022 but the shipping department left early for the new year's holiday and shipment was not made until January 3, 2023. In anticipation of your $450,000 commission, you purchased a car and a condo over the holiday. You return to work in January 2023 only to learn that firm's financial VP refused to record any revenue or pay any commission related to that shipment. Why? The equipment was not shipped before year-end. There was no contract with the customer. The customer did not pay for the equipment in 2022. The transaction price was undetermined. There was no reasonable assurance that the customer would be able to pay for the equipment.
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