Essay about Vitamix Revenue Recognition

The extended service plan does not start until after the factory warranty expires. Should Vitamix recognize the revenue received from the sale immediately or at the time when the factory warranty expires? Revenue Recognition Vitamix should recognize the revenue immediately because the cost of servicing the extended warranty can be reasonably calculated. The accounting team calculates the costs associated with servicing this warranty based on historical averages and accrues for it as a percentage of sales. Since we can estimate the cost, we can therefore produce an accurate net revenue amount because this amount is a conservative and reasonable amount of the realized and earned revenue. (Connors, 2011) Household Show Consignment Sales Overview To show the versatility and power of the Vitamix product, the company frequently demonstrates their machines at large retail locations. The retailer requires that they ship pallets of product to various retail stores and then Vitamix contracts with independent contractors to demonstrate the product. However, the retailer does not purchase the machines at that time, but requires that Vitamix manage that inventory for them. When a customer of the retailer wishes to purchase the machine, they take a machine along with any other products they wish to purchase to the retailers point of sale. The retailer sends Vitamix a purchase order for the machines processed through their point of sale system on a daily basis. Should