Asked by Andrea Anguiano on Apr 27, 2024
Verified
Revenue from a credit sale may be deferred because
A) realization has occurred
B) the collectibility of the receivable is not reasonably assured
C) a right of return exists
D) both the collectibility is not reasonably assured and a right of return exists
Credit Sale
A type of transaction in which goods or services are provided to a customer with the understanding that payment will be made at a later date.
Collectibility
The likelihood that a receivable will be collected from a debtor, typically considered in revenue recognition and accounting for bad debts.
- Learn the criteria for revenue recognition, especially in scenarios involving rights of return and collectibility issues.
Verified Answer
PB
Prince BensonApr 29, 2024
Final Answer :
D
Explanation :
Revenue from a credit sale may be deferred if both the collectibility is not reasonably assured and a right of return exists. In this case, the amount of revenue that can be recognized must be limited to the amount that is reasonably assured to be collected. Additionally, the company must estimate the expected returns and reduce the revenue recognized accordingly.
Learning Objectives
- Learn the criteria for revenue recognition, especially in scenarios involving rights of return and collectibility issues.