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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Revenue Recognition

Volume Electronics sold a television to Sarah Merrifield on December 15, 2019. Sarah paid $100 at the time of the purchase and agreed to pay $100 each month for 5 months beginning January 15, 2020.

Required:

Determine in what month or months revenue from this sale should be recorded by Volume Electronics to ensure proper application of accrual accounting.

To determine

Revenue recognition:

Revenue recognition on the accrual accounting basis is done when the amount is received or receivable and the goods are sold i.e. the revenue is earned and realized or realizable. In Accrual accounting system, the sale revenue should be recognized as and when all the significant risks and rewards of ownership are transferred from a seller to a buyer irrespective of the payment and possession of the goods.

The time of revenue recognition.

Explanation

Volume Electronics sold television on December 15,2019, with the transfer of all the risks and rewards on the television. The payment is made partly $100<

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